Emerging market growth fears hits oil

US crude futures have fallen for the first time this week, as worries grow that a bleak outlook for emerging markets will reduce energy demand.

The strength of the global recovery has being called into question these last few days, with sentiment heading south in the wake of recent signs of weakness in the Chinese economy.

Along with the fear that the Fed’s reduction in stimulus will hamper demand, these concerns have stung emerging markets, weakening their currencies and sending stock prices around the world lower.

Crude oil futures yesterday achieved their highest close so far this year, boosted by signs of strong fuel demand reported by hte US Energy Department and by forecasts calling for sustained frigid weather in the US, but the emerging markets story has outweighed these factors in today’s trading and by mid-afternoon in New York, crude oil futures for March had fallen 0.68%.

The flow of money out of emerging markets and into safe havens, such as gold, US Treasuries and the Japanese yen, has picked up pace as the week has progressed, with the resulting declines in riskier assets encouraging greater flight to safety.

Though slower growth in China may affect fuel demand in the long run, the short-term fundamentals should prove supportive in the US, with severe cold expected to last deep into next week, boosting heating oil consumption, which is a distillate of crude oil.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.