Oil drops below $84 on China data, end of Statoil strike in North Sea

NEW YORK, N.Y. – Oil prices tumbled Tuesday on further signs of an economic slowdown in China and after the government of Norway intervened to end a strike that threatened North Sea oil production.

Benchmark U.S. crude fell by US$2.08, or 2.4 per cent, to finish at $83.91 per barrel. Brent crude lost $2.35 to close at $97.97 per barrel in London.

China’s June imports increased by about 6 per cent. That is down from May’s rate and worse than analysts had expected. Growth in exports slowed as well. China is the world’s second biggest oil consumer behind the U.S. and if its economy slows it won’t need to use as much energy.

“Crude imports into the country last month fell 14 per cent from May to a seven-month low,” independent oil analyst Jim Ritterbusch said. Traders will closely watch China’s second quarter GDP and industrial production numbers, due out at the end of the week, he said.

The threat of an industry shutdown in Norway ended Monday night after the government imposed binding arbitration on striking Statoil workers. That prevented a lockout that would have cut off about 1.6 million barrels a day of Brent crude. Brent is the benchmark used to price a variety of foreign oils, and many East Coast refineries use it to make gasoline.

There was also the chance that the strike would crimp supplies to major export markets, namely the U.K., the Netherlands, France and Germany, just as Europe puts in place an embargo on Iranian oil in a bid to curb its nuclear program.

“The resolution of the labour dispute in Norway is significant.” said energy trader and consultant Stephen Schork.

In the U.S., the Energy Department released its monthly Short-Term Energy Outlook on Tuesday. Among the highlights:

— Benchmark U.S. crude is expected to average $88 per barrel in the second half of the year, down $7 from last month’s outlook.

— Retail gasoline is seen averaging $3.39 a gallon in the third quarter, $3.49 a gallon for the year and $3.28 per gallon in 2013.

— U.S. crude oil production should average 6.3 million barrels per day, the highest production level since 1997. Production should rise to 6.7 million barrels per day next year.

On Wednesday the Energy Department releases its weekly report on the nation’s crude oil supplies. Analysts surveyed by Platts, the energy information arm of McGraw-Hill, estimate stocks will shrink by about 1.5 million barrels. That would be less than the five-year average draw of 3.7 million barrels for the comparable week. The amount of crude in storage is about 11 per cent above the five-year average.

At the gas pump, the national average for a gallon of regular remained at $3.38 a gallon, according to AAA, Wright Express and Oil Price Information Service. That’s about five cents higher than a week ago, but still around 25 cents lower than a year ago.

In other energy trading heating oil futures fell three cents to finish at $2.72 a gallon. Wholesale gasoline rose 1.25 cents to close at $2.75 a gallon. Natural gas lost 14 cents to finish at $2.737 per 1,000 cubic feet.