Oil prices declined following yesterday’s rally that saw the futures hit one month highs on good news from China and anticipation of strong retail sales data in the US.
China’s industrial production jumped 13.9% in August, yesterday’s update showed. The widely anticipated US retail sales data will be released today with analysts foreseeing another gain following a 0.4% climb in July.
The news triggered a rally in stock markets in Asia, Europe and the US, while oil prices nearly reached US$80/barrel, largely due to the optimism about China’s oil demand inspired by the strong growth in industrial output.
Today’s update on the UK CPI (consumer prices index) revealed no change from July’s annualised rate of 3.1%.
Equities were flat today with the FTSE 100 standing just 1 point above the opening level, while futures for the Dow Jones Industrial Average slid 0.2% after the index advanced 0.8% on Monday.
Oil prices usually track movements in stock markets as share prices serve as an indicator of the strength of the economy and outlook for energy demand.
However, crude futures declined this morning ahead of US inventories reports that will be released by the American Petroleum Institute (API) and the US Energy Department today and on Wednesday respectively.
Crude oil stockpiles in the US have been on the rise, suggesting declines in demand in the world’s largest energy consumer.
Secretary General of OPEC (Organization of Petroleum Exporting Countries) Abdullah Salem el-Badri said today that the organization expects oil prices to be in the range between US$72-83/barrel in the nearest future and that the outlook for 2011 was still cloudy.
El-Badri has also stated that OPEC is not looking to expand.
The cartel is celebrating its 50-th anniversary today.
October Brent Crude slid to US$78.74/barrel, while US light, sweet crude for October delivery declined to US$76.79/barrel.
BP (LON:BP) posted a small gain, while fellow supermajor Shell (LON:RDSB) declined marginally, as did BG Group (LON:BG).
Tullow Oil (LON:TLW) and Cairn Enegy (LON:CNE) did better, tacking on 1.4% and 1.2% respectively.
Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) added just over 1.5%.
Midcaps didn’t move by much. Dana Petroleum (LON:DNX) and Melrose Resources (LON:MRS) stood just above the opening level, while Dragon Oil (LON:DGO), Heritage Oil (LON:HOIL), JKX Oil & Gas (LON:JKX) and Premier Oil (LON:PMO) posted small losses and Soco International (LON:SIA) declined 1%.
Salamander Energy (LON:SMDR) was in the lead with a 1.7% advance.
Engineering company Wood Group (LON:WG) shed less than 1%.
European focussed oil and gas exploration and production company Ascent Resources (LON:AST) emerged as one of the top performers among the small caps with a 7% rise. Kurdistan focused Gulf Keystone Petroleum (LON:GKP) added 4.5%.