Oil fell as the week began trading, with poor Chinese economic data adding to concerns that a global slowdown could dampen demand.
West Texas Intermediate fell toward $97 a barrel in July after sinking nearly 7%. In the first back-to-back monthly loss since the end of 2020. Weekend data indicated a surprising contraction in Chinese factory activity, highlighting the cost of Beijing’s preference for mobility restrictions. Deal with Covid-19.
Oil has seen volatile trading in recent months as recession concerns hurt demand for the commodity, while underlying cues still pointed to tight physical conditions. Last week’s data showed the US economy shrank in the second quarter, while the Federal Reserve raised rates by 75 basis points.
“The fall in China’s manufacturing PMI was likely to be at the heart of the fall in oil prices,” said Vivek Dhar, director of mining and energy commodities research at the Commonwealth Bank of Australia. He said China’s position would rekindle concerns that global commodity consumption would continue to weaken.
- WTI for September delivery fell 1.3% to $97.32 a barrel on the New York Mercantile Exchange at 6:07 a.m. in London.
- Brent for October settlement was down 1% to $102.94 a barrel on the ICE Futures Europe exchange.
Meanwhile, in Libya, after a series of disruptions in crude production, supplies have slashed by more than half, according to the OPEC member’s oil minister. Mohamed Aun said in a telephone interview that nationwide production is back to 1.2 million barrels a day, last seen in early April.
This weekend investors will focus on a meeting of the Organization of the Petroleum Exporting Countries and its allies, including Russia, to determine the grouping policy for September. While the US has lobbied Saudi Arabia to loosen the tap to increase pressure against Russia for an invasion of Ukraine, Moscow and Riyadh recently reaffirmed a joint commitment to a stable market.
Oil markets remain in a bearish trend, a bullish pattern that is trading above the longer term price range. The quick spread of WTI – the difference between its two nearest contracts – was $1.83 a barrel. This is in line with the year-over-year average, but lower than a month ago.