Baku, Azerbaijan, May 26
By Aygun Badalova - Trend:
Devaluation of Chinese currency is not a decisive factor in global oil prices fall, Tao Wang, expert at Carnegie-Tsinghua Center for Global Policy believes.
"I don't think the devaluation of Chinese currency led the fall of oil price, it is driven mostly by surplus supply from US and the expectation of more supply from Saudi Arabia, Russia and Iran," Wang told Trend on August 26.
"The weak global demand is the other side of the coin, of which China's weak demand is contributing factor, but not decisive," he added.
Oil prices on the world markets continue to fall. WTI price has fallen to $38.24 a barrel early this week, which was the lowest level since February 2009. Brent price has dropped below $43 a barrel.
China's currency devaluation has led to the concern over the weak oil demand in the country, which is the world's largest importer.
"Given the difficulty in economic transition, and the slowing down growth in industrial sector, this weak demand of oil from China is not surprising. The prospect depends on how Chinese economy transition would evolve in the next 1-2 years, which means the demand may not come back to a high level soon," Wang said.
Analysts of the US J.P. Morgan bank expect a 5% depreciation in the renminbi by end-2015. Furthermore, we expect Chinese gasoil/diesel demand growth to see a minimal impact unless steep rises in PMI are registered.
"By contrast, from a macroeconomic perspective, the moves by the Chinese government to devalue the currency offer the prospect of further currency competition in the emerging markets," analysts said.
Ultimately, they believe this increases the possibility of stronger US dollar weighing on oil prices this year.