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Wednesday, August 17, 2022

Brent crude prices drop again as China’s yuan falls more

By Henning Gloystein

SINGAPORE (Reuters) – Brent crude prices fell again on Wednesday as oil production hit multi-year highs and as China’s currency devaluation continued, triggering concerns over the country’s economic health.

Brent futures initially edged up before continuing their slide of the last two months as China’s offshore yuan (CNH=D3) fell to nearly four-year lows after the central bank weakened the currency’s official midpoint for a second day. That erodes Chinese purchasing power for dollar-denominated imports like oil.

Benchmark Brent futures (LCOc1) were at $ 48.85 per barrel at 0205 GMT, down 33 cents from their last settlement. U.S. crude (CLc1) was trading at $ 42.96 per barrel, down 10 cents from Tuesday when it marked it lowest settlement since March 2009.

Overall, analysts said that oil fundamentals remained weak.

“Last week’s strong trend of a build-up in (U.S.) refined product inventory will be negative for prices if the trend continues again this week. Globally, OPEC posted the highest crude supply in more than three years,” ANZ bank said on Wednesday.

The Organization of the Petroleum Exporting Countries (OPEC) said on Tuesday that its members continued to boost supplies. According to secondary sources cited by the report, OPEC produced 31.51 million barrels per day (bpd) in July – 1.5 million bpd more than its 30-million-bpd target.

OPEC also raised its forecast of oil supplies from non-member countries in 2015, a sign that crude’s price collapse is taking longer than expected to hit U.S. shale drillers and other competing sources, and the group forecast no extra demand for its crude oil this year.

(Reporting by Henning Gloystein; Editing by Michael Perry and Joseph Radford)

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