Oil prices plunged by 4% at the start of August as the market digested weak economic figures from China, the world’s largest crude oil importer.
As of 10:12 a.m. ET on Monday, WTI Crude prices were down by 4.49% at $94.22. WTI Crude started August on the decline, following the first back-to-back monthly losses in June and July since the end of 2020. Brent Crude, the international benchmark, was down to $100—after finishing July at the $103 a barrel handle, following a brief intra-day spike to $110 on Friday. Brent Crude traded down by 3.37% to $100.40 at 10:12 a.m. ET on Monday.
The market sentiment at the start of this month was one of concern about the pace of global oil demand after Chinese factory activity unexpectedly contracted, and its 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 the major Eurozone countries and in South Korea.
In China, COVID flare-ups in July led to an unexpected contraction in factory activity, according to data from the Chinese National Bureau of Statistics.
Per the Caixin China General Manufacturing PMI, the rate of improvement in China’s business conditions eased in July from a 13-month high in June and was only marginal.
Weak economic data from China rekindled fears about an economic slowdown in major economies and importers of crude, which could weigh on oil demand going forward.
Later this week, traders and market analysts will be watching the OPEC+ monthly meeting on August 3, the first after the group decided to have all the 2020 cuts rolled back by the end of this month.
“After gains last week, the focus in crude oil is shifting to the OPEC+ meeting this week where expectations for any notable increase in output for September are minimal. Supply side issues also continue to underpin but focus short-term has shifted to China’s manufacturing PMI miss and the resulting demand contraction,” Saxo Bank said on Monday.
By Tsvetana Paraskova for Oilprice.com
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