Oil prices drop on China slowdown

[LONDON] Oil prices slid Monday on data revealing that China's economy posted its slowest growth for more than six years, reinforcing concerns about weak demand from the world's top energy consumer.

US benchmark West Texas Intermediate for delivery in November dropped US$1.07 to US$46.19 a barrel compared with Friday's close.

Brent North Sea crude for December delivery shed US$1.36 to stand at US$49.10 a barrel in late London deals.

"Oil prices are beginning the new week of trading down in the wake of predominantly weak Chinese economic data," said Commerzbank analyst Carsten Fritsch.

China, the world's second biggest economy after the United States, said its gross domestic product (GDP) rose 6.9 per cent in the three months to September, beating market forecasts but still the worst since the global financial crisis in 2009.

Growth in China's industrial production, which measures output at factories, workshops and mines, also dropped sharply to 5.7 per cent year-on-year in September, the government said.

"Although China's retail sales turned out strong, industrial-related data remained weak. This would likely be weighing down on commodity usage in China," Daniel Ang, an investment analyst with Phillip Futures in Singapore, said in a market commentary.

"With weak Chinese industrial production, we may see Chinese manufacturing PMI worsen, thus leading to weaker oil prices," he said, referring to the forward-looking Purchasing Managers' Index to be released later this week.

The market was looking ahead to a meeting of OPEC and non-OPEC "technical" experts in Vienna on Wednesday.

Oil producer Russia said last week it was prepared to discuss output cuts during the meeting, although analysts doubted that any firm deal would be reached at the meeting closed to media.

One OPEC member, Libya, on Monday again expressed confidence over its ability to raise substantially the amount of crude produced by the north African nation.

Speaking on the sidelines of an oil conference in London, the chair of Libya's National Oil Corporation, Mustafa Sanalla, said Libya can "easily" reach a daily output of two million barrels of crude oil, up from only 440,000 barrels currently, as the country's security situation improves.

Oil is Libya's main natural resource, with a pre-revolt output capacity of about 1.6 million barrels per day, accounting for more than 95 per cent of exports and 75 per cent of the budget.

Western and Arab states on Monday issued a joint declaration urging rival sides in Libya to accept UN proposals for a power-sharing government "immediately" to end rampant instability in the country.

Oil prices fell for four straight trading days last week before advancing Friday after data showed a fresh decline in US oil exploration, which suggested an easing of global oversupply.

AFP