(EnergyAsia, September 2 2015, Wednesday) — Crude oil prices ran out of steam as traders quickly cashed out on that brief 27% recovery over the last three days of August. North Sea Brent just about held onto US$50 a barrel while US WTI traded just above US$45 after both had sunk to their lowest levels in six-and half years last month.
China ignited fears of a global economic slowdown and possibly a currency war when it unexpectedly devalued the renminbi (RMB) by a total of 4.65% from August 11 to 13, and then inexplicably revalued it the following two trading days. Its central bank undertook a few more zig-zag adjustments that have largely kept the RMB trading just below 6.4 to the US dollar, compared with 6.2 in much of the previous 15 months. The government is also desperately trying to prevent the collapse of the Chinese stock markets which have lost an estimated US$5.5 trillion in recent months.
Analysts are debating if Beijing’s actions are part of a long-term market reform strategy or signs of desperation by a government that has lost the plot. The IMF has downgraded its forecasts for Chinese economic growth to well below the psychological seven percent over the next two years.
Analysts at US ratings agency Moody’s believe crude oil will remain below US$50 a barrel through 2018 while Canada’s Scotiabank predicts it will languish for at least another year.