WTI Crude Oil Price Today Falls Alongside Chinese Yuan

8 11 15 wti crude oil priceThe WTI crude oil price today (Tuesday) dropped toward a six-year low after China's unexpected decision to devalue its yuan currency.

At 10:10 a.m., the WTI crude oil price was down 3.74% and trading at $43.28 a barrel. Today's losses erased yesterday's gains of 2.5%, which came on a respite in the U.S. dollar's rally. The U.S. benchmark has fallen 8.1% in August so far.

The Brent crude oil price was slightly less volatile this morning. The international benchmark ticked down 2.82% to trade at $49.58 a barrel. Futures have dropped 6.2% this month.

The steep fall in the WTI crude oil price today came after China devalued the yuan following weekend data that showed the country's exports tumbled 8.3% in July. This morning, China's central bank - the People's Bank of China (PBOC) - depressed its value by 1.9% to 6.23 yuan per dollar. That marks the lowest point since 2012 and the largest one-day fall since 1994, when China issued a massive devaluation after aligning its official and market rates.

Although the nation touts the devaluation as a way to reform its struggling markets, it raises international concerns that China's government is panicking.

"Since China's trade in goods continues to post relatively large surpluses, the yuan's real effective exchange rate is still relatively strong versus various global currencies, and is deviating from market expectations," the PBOC said in a statement. "Therefore, it is necessary to further improve the yuan's midpoint pricing to meet the needs of the market."

Since most commodities, like crude oil, are pegged to the U.S. dollar, China's decision will make these imported commodities more expensive.

But what most investors don't know is that China's oil demand and economic woes don't affect each other as much as pundits are saying.

According to Money Morning Global Energy Strategist Dr. Kent Moors, the country's energy needs will remain stronger than ever...

How China's Situation Will Boost the WTI Crude Oil Price

Many energy experts consider China's crumbling markets an opportunity for oil prices to test historic lows. After all, the country's bellwether Shanghai Composite Index has been testing the same lows recently, crashing 24% from its June highs.

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But all of this is distorting the country's energy needs. China's massive market sell-off has little if any relationship to its growing oil demand, which has steadily grown since last year and increased 3.5% in June alone.

"To say, therefore, that the 'historic' loss in the Chinese stock market is a harbinger for a massive industrial slowdown causing massive cuts in oil imports is not only incongruous, it is also quite misleading," Moors explained.

Last month, Moors outlined how China is just one aspect of a "perfect storm" in the energy sector that's about to blow over. Here's his take on why the storm will soon pass...

Alex McGuire is an associate editor for Money Morning who writes about oil and natural gas. Follow him on Twitter at @AlexMcGuire92 for the biggest energy updates.

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