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Oil prices drop on Chinese data, demand concerns

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Oil prices fell on weak economic data that came out in China today and expectations of a buildup in US crude oil supplies.

This morning, China said its trade surplus narrowed from US$31.5 billion in July and US$17.8 billion in August to US$14.5 billion last month as growth in exports fell sharply, owing to weaker demand from the US and Europe.

The update added to concerns that economic growth in the world’s second largest energy consumer is slowing, which will likely reduce China’s demand for oil.

Oil futures faced more pressure from expectations of an increase in US oil supplies after a poll by Bloomberg News projected today’s closely watched weekly inventories report from the US Department of Energy to show a gain of 0.8 million barrels, a sign that oil demand was in decline last week.

Adding to that were this week’s bearish comments from the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), which have both lowered their demand forecasts.

OPEC, which accounts for around 40 percent of global oil supplies, has slashed its 2012 oil demand projection by 100,000 barrels per day (bopd) and the IEA reduced its estimates for the year by 210,000 bopd.

US light, sweet crude for November delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), dropped US$2.11 to US$83.46/barrel in morning trade in New York.

November Brent crude fell US$1.75 to US$109.44/barrel on the ICE Exchange this afternoon.

Today’s top risers in the oil and gas sector were:

Dominion Petroleum (LON:DPL), up 48.5 percent at 5.35 pence at midday

Xtract Energy (LON:XTR), up 12.5 percent at 1.38 pence

Europa Oil & Gas (LON:EOG)
, up 12 percent at 11.07 pence

Nighthawk Energy (LON:HAWK), up 10.5 percent at 3.42 pence

Leed Petroleum (LON:LDP), up 9 percent at 0.12 pence

The top fallers were:

Tower Resources (LON:TRP), down 12.5 percent at 3.05 pence at midday

TXO (LON:TXO), down 9 percent at 0.569 pence

Desire Petroleum (LON:DES), down 6.5 percent at 19.6 pence

Nostra Terra Oil & Gas (LON:NTOG), down 6.5 percent at 0.463 pence

Gasol (LON:GAS)
, down 5.5 percent at 0.566 pence

Quick facts: Brent Crude Oil

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LSE:BRENT
Market: LSE
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