Slump in China’s Economic Stocks hits Energy Sector Hard

Published Date : Jan 22, 2015

Dip in the oil market prices on Tuesday following the below expectation economic growth of China has hit the energy sector hard. This slump in growth rate of Chinese economy in 2014 amplified the worries of already suffering energy markets due to the decreasing demand and oversupply. 

The National Bureau of Statistics in China said that the second largest economy in the world has hit its lowest in nearly six years registering growth of only 7.4% compared to the target of 7.5%. However, the figures that the Chinese economy registered came slightly better than the expected 7.3%. 

According to Daniel Ang, investment analyst at PhillipCapital in Singapore, the gloomy figures registered by China’s GDP garnered mixed reactions. Slower growth rate of China’s economy indicated negative prospects for demand for oil in the short term. However, slight growth in industrial production registered in 2014 predicted improvement in the long run. Mr. Ang added that the survey conducted on economic sentiment in EU and Germany which is scheduled for a Tuesday release at 1000 GMT has potential of having greater impact on oil prices. 

The International Monetary Fund on the other hand lowered its predictions about the global economic growth in 2015 and asked the governments and central banks to observe and implement complaisant monetary policies and structural reforms to support growth. 

Following the sluggish growth rate of China’s economy major companies like Atlas Resource Partners, L.P. (NYSE: ARP), Goodrich Petroleum Corporation and Denbury Resource Inc. suffered a setback, each losing more than 5% of their existing market share. As added by a spokesperson from Barclays, the refiners are likely to run on any crude that will make an attractive margin, both economically and technically. The additional crude oil that the industry has will go into storage only to be sold at higher prices in future, stated the bank. 

A statement published by Moody’s on Tuesday says that the dropping oil prices could have adverse or
negative effects on the production companies across Southeast Asia