In this August 7, 2003 file photo, a Chinese bank worker displays Chinese yuan at a bank in Beijing. China devalued its tightly controlled currency on Tuesday, August 11, 2015, following a slump in trade, triggering the yuan’s biggest one-day decline in a decade. The central bank said the yuan’s 1.3 percent fall was due to a change aimed at making its exchange rate controls more market-oriented. But any change raises the risk of tensions with China’s trading partners. AP
NEW YORK, United States – US oil prices sank to their lowest level in more than six years Tuesday after a surprise currency devaluation in China raised worries about the world’s second-biggest economy.
US benchmark West Texas Intermediate for delivery in September fell $1.88 to $43.08 a barrel on the New York Mercantile Exchange, the lowest level since March 2009.
European benchmark Brent oil for September delivery fell $1.23 to $49.18 a barrel in London.
China’s central bank devalued its yuan currency Tuesday by nearly two percent against the US dollar, as authorities said they were seeking to push market reforms, in the context of a slowing economy.
The move surprised markets and led to a wave of selling on US and European equity bourses, as well as across many commodity exchanges.
“The market has interpreted the move as a sign that the health of the Chinese economy is probably worse than even what the official data suggests,” said Forex.com analyst Fawad Razaqzada.
“Obviously the move by China to devaluate its currency is severely affecting the market generally,” said John Kilduff, founding partner at Again Capital.
“China is obviously key to the demand story as we look forwards,” Kilduff added.
Traders are also jittery that fresh petroleum data in coming days will show a worsening global supply glut. These include Wednesday’s weekly oil-inventory report from the US Department of Energy.
“There are concerns demand numbers will be lame” and that data will show excess supply, said Bob Yawger of Mizuho Securities.