Oil prices erase nearly all of last week's gains on China demand woes

By Colleen Howe

(Reuters) - Oil prices on Monday wiped out nearly all gains made last week after data showed China's inflation rate declined and a lack of clarity on the country's economic stimulus plans stoked fears about fuel demand in the world's biggest crude importer.

Brent crude futures fell $1 to $78.04 per barrel by 0649 GMT, while U.S. West Texas Intermediate crude futures also fell $1, or 1.3%, to $74.56 per barrel.

Both benchmarks gave up all their gains from last week, falling by more than 1.5% a barrel earlier on Monday, before recovering some ground. Brent gained 99 cents last week, while WTI climbed $1.18.

China's deflationary pressures worsened in September, according to official data released on Saturday, and a press conference the same day left investors guessing about the overall size of a stimulus package to revive fortunes in the world's second-largest economy.

The negative news from China outweighed market concerns over the lingering possibility an Israeli response to Iran's Oct. 1 missile attack could disrupt oil production, though the U.S. has cautioned Israel against targeting Iranian energy infrastructure.

"Consumer prices index reading from China indicates a sustained deflationary trend and weaker domestic consumption despite the announcement of the most aggressive monetary stimulus by authorities in September," Priyanka Sachdeva, an analyst at Phillip Nova, said in a note on Monday.

The consumer price index missed expectations, and the producer price index fell at the fastest pace in six months, down 2.8% year-on-year, according to China's National Bureau of Statistics.



IG market analyst Tony Sycamore called the briefing by the Chinese finance ministry on Saturday "a flop."

"The fiscal measures needed to remove downside risks to growth and ignite the animal spirits within Chinese consumers (are) conspicuous in their absence," Sycamore said.

Source: Investing.com