Plunging demand from China sends oil prices into a tailspin

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Oil prices fell by as much as $3 yesterday after cautious economic data from China added to concerns at a stalling of the global recovery.

In London, Brent crude for August delivery hit a low of $115.22 a barrel, down $3.12, while oil in New York touched $2.13 a low of $94.10.

The market nervousness came in response to the news that China's oil imports fell to an eight-month low in June – 5.7 per cent lower than the month before and down by 11.5 per cent year on year.

The figures add to concerns that the Chinese government will slow growth with a sharp tightening of monetary policy, in response to consumer price inflation running at 6.4 per cent last month despite five interest rate rises since October.

Oil was already on the slide after lacklustre US jobless statistics at the end of last week revealed a 9.2 per cent unemployment rate, with only 18,000 jobs created in June, pointing to stagnant growth in the world's biggest economy.

The latest oil price falls are set against a backdrop of steady increases for most of the year, fuelled first by economic improvements, and then by jitters over the impact of the Arab Spring and the withdrawal of Libya's 1.7 million barrels per day (bpd) from the market in the present conflict.

Last month, a faction of the 12-strong Opec oil producers' cartel – including Iran and Venezuela – ruled out other members' calls for an increase in production to make up for the gap left by Libya and help to control the steadily rising price.

But Saudi Arabia, whose oil minister, Ali al-Naimi, led the proposals for a supply increase, nonetheless upped its production by 450,000 barrels to 9.5 million bpd.

And the International Energy Agency, which represents oil consumers, co-ordinated a 60,000-barrel injection from global oil reserves, about half of came from the US. The IEA measures were criticised after an initial drop in prices was quickly reversed.