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Oil slips further below US$86 a barrel as Chinese trade growth slows

An oil pump works at sunset, June 8, 2011, in the desert oil fields of Sakhir, Bahrain. THE CANADIAN PRESS/AP, Hasan Jamali

Oil slipped further below US$86 a barrel Tuesday after weak Chinese trade figures suggested the economic slowdown in the world's second-largest crude consumer is deepening.

Meanwhile, the government in Norway ordered the end of a labour strike in the oil sector, easing supply concerns on that front.

By early afternoon in Europe, benchmark West Texas Intermediate crude for August delivery was down 14 cents at US$85.85 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose had risen $1.54 to settle at US$85.99 on Monday in New York.

In London, Brent crude for August delivery was down 88 cents at US$99.44 a barrel on the ICE Futures exchange.

China said Tuesday that June imports increased 6.3 per cent, which was less than analyst forecasts and down by half from May's growth rate while export growth declined to 11.3 per cent from 15.3 per cent in May.

Waning growth in Chinese demand for crude and other commodities suggests global oil consumption might be weaker than previously thought. Crude has fallen from US$106 in May amid signs that economic growth in U.S., Europe and China is flagging.

Traders will get more insight into the health of the Chinese economy when second-quarter gross domestic product is released Friday.

"The last couple of months' worth of macroeconomic headlines have fomented doubt about the prospects of robust global oil demand through the remainder of 2012," energy trader and consultant The Schork Group said in a report.

A resolution to a labour dispute in Norway also weighed on oil prices. Early Tuesday, the Norwegian government imposed compulsory arbitration in a disagreement over employee retirement benefits that could have forced the oil industry to prepare for a historic shutdown in the North Sea.

"The intervention means that a major supply disruption is prevented," said Olivier Jakob of Petromatrix in Switzerland.

Norway's oilfields produce about 1.6 million barrels of oil a day.

"It may take from one to two days to get production started and Statoil expects to have the fields back in full production within a week," said a statement released by Norwegian oil and gas company Statoil.

Workers had been on strike since June 24, and the country's oil industry had been planning a lockout to begin at midnight Monday night.

"Norway is a key contributor to the energy economy along the U.S. Atlantic seaboard," Schork said. "Therefore, the resolution of the labour dispute in Norway is significant."

Investors will also be monitoring fresh information on U.S. stockpiles of crude and refined products.

Data for the week ended July 6 is expected to show a draw of 1.5 million barrels in crude oil stocks and a build of 600,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the U.S. Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.

In other energy trading, heating oil was down 3.5 cents at US$2.71 a U.S. gallon (3.79 litres) and gasoline futures fell three cents to US$2.73 a gallon. Natural gas gained one cent to US$2.87 per 1,000 cubic feet.


News from © The Associated Press, 2012
The Associated Press

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