Oil prices fell early on Monday to start August with losses after posting a fourth consecutive month of gains in July.
Oil settled higher on Friday to end the fourth straight month of gains but erased Friday gains on Monday on resurging COVID cases globally, weak Chinese economic data, and higher oil supply from the OPEC+ group.
“Crude futures had more than reversed Friday’s modest gains in the early hours of Monday’s trading in Asia as headlines over the weekend brought mostly discouraging news on the Delta variant-led Covid resurgence marching across the globe,” Vanda Insights said in a note early on Monday.
“Top-of-mind for the oil market was China, where the worst Covid outbreak in months has spread to two more parts of the country — Fujian province and the megacity of Chongqing — health authorities said on Saturday,” Vanda Insights added.
China also saw its weakest manufacturing sector expansion in 15 months, according to the Caixin China General Manufacturing Purchasing Managers’ Index (PMI).
The weaker economic data and resurgence of COVID cases combined with the higher production from the OPEC+ group to weigh on oil prices at the start of August.
OPEC alone is estimated to have pumped in July its highest oil volumes since April 2020—at 26.72 million barrels per day (bpd), up by up 610,000 bpd from June, the monthly Reuters survey found on Friday. As of August, the OPEC+ alliance is putting another 400,000 bpd on the market.
This week, the market will be watching the new Iranian president Ebrahim Raisi taking office and the potential implications for the nuclear talks, especially in light of last week’s drone attack on an Israeli-linked oil tanker offshore Oman, after which the U.S. and the UK joined Israel in blaming Iran for the attack.
“Upon review of the available information, we are confident that Iran conducted this attack, which killed two innocent people, using one-way explosive UAVs, a lethal capability it is increasingly employing throughout the region,” U.S. Secretary of State Antony Blinken said Sunday.
By Tsvetana Paraskova for Oilprice.com
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