Oil prices fell 4% in early August as the market digested weak economic data from China, the world’s biggest crude importer.
As of 10:12 a.m. ET Monday, WTI crude prices were down 4.49% at $94.22. WTI Crude started August lower, after the first consecutive monthly losses in June and July since late 2020. Brent Crude, the international benchmark, fell to $100 – after ending July at $103 a barrel, after a brief intraday jump to $110 in Friday. Brent Crude was trading down 3.37% at $100.40 at 10:12 a.m. ET on Monday.
Market sentiment earlier this month was linked to concerns about the pace of global oil demand after Chinese factory activity unexpectedly shrank and the manufacturing purchasing managers’ index (PMI) improved only marginally in July and was well below expectations.
PMI readings were also weaker in July than in June in major eurozone countries and in South Korea.
In China, bouts of COVID in July led to an unexpected contraction in factory activity, according to data from China’s National Bureau of Statistics.
The pace of improvement in business conditions in China slowed in July from a 13-month peak in June and was marginal, according to the Caixin China General Manufacturing PMI.
Weak economic data from China reignited fears of an economic slowdown in major economies and crude oil importers, which could weigh on oil demand going forward.
Later this week, traders and market analysts will be watching OPEC+’s monthly meeting on August 3, the first since the group decided to end all cuts for 2020 by the end of this month.
“Following last week’s gains, the focus in crude shifts to this week’s OPEC+ meeting, where expectations for any significant September output increase are minimal.” Supply-side issues also remain at the core, but the near-term focus has shifted to China’s lack of manufacturing PMI and the resulting contraction in demand,” Saxo Bank said on Monday.
By Tsvetana Paraskova for Oilprice.com
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