Oil falls to near $103 in Europe after China economic growth slows in Q1

Oil prices fell to near US$103 a barrel Friday after data showed economic growth slowed more than expected in China, the world’s second-largest crude consumer.

By early afternoon in Europe, benchmark West Texas Intermedicate crude for May delivery was down 37 cents to US$103.27 a barrel in electronic trading on the New York Mercantile Exchange. The contract has risen 94 cents to settle at US$103.64 in New York on Thursday.

In London, Brent crude, used to price varieties imported by U.S. refineries, was down 28 cents at US$121.23 a barrel on the ICE Futures exchange.

China said Friday its economy grew by 8.1 per cent in the three months ended in March, its weakest expansion since the second quarter of 2009. It grew 8.9 per cent in the last quarter of 2011.

“Crude oil prices are suffering somewhat from the moderate risk-off environment after China’s worse than expected GDP data,” said a report from Sucden Financial in London.

However, “other Chinese data releases such as retail sales, industrial production and urban investment came in above expectations, which has mitigated some of the immediate downside from the GDP miss,” Sucden said.

Developing economies, led by China, have accounted for most of the increase in global crude demand in recent years as the U.S. and Europe struggled with weak economies. China’s breakneck economic growth, which has averaged about 10 per cent a year in the past decade, helped push oil prices up from US$10 in 1998.

Some analysts expect Chinese growth to bottom this quarter before a strengthening global economy helps boost crude prices in the second half.

“With Chinese data somewhat patchy, U.S. employment growth slowing, Europe still in the midst of a protracted recession, it’s tempting to focus on the short-term downside risks,” J.P. Morgan said in a report. “The reality is that any short-term weakness in energy prices is likely to prove limited.”

The release of U.S. inflation figures later Friday will also help determine market sentiment.

Investors will also be closely watching meetings between Iran and the United States, France, Britain, Russia, China and Germany that begin Saturday in Turkey. The negotiations are a bid to avoid a military strike by Israel or the U.S. against Iran’s nuclear facilities that could disrupt global crude supplies, but analysts expect the talks will likely be drawn out over several months.

“Any conciliatory gestures on Iran’s part will force a magnified downward price reaction, but we don’t expect major developments to come out of the weekend meetings,” energy trader and consultant Ritterbusch and Associates said in a report.

In other energy trading, heating oil was down 0.68 of a cent at US$3.1595 a U.S. gallon (3.79 litres) and gasoline futures slid 0.15 of a cent to US$3.3552 a gallon. Natural gas fell 0.3 of a cent to US$1.98 per 1,000 cubic feet.