Oil slumps as weak manufacturing data from China and Japan weighs on demand outlook
Oil prices fell on Monday as weak manufacturing data from China and Japan for July weighed on the demand outlook.
Brent crude futures fell 82 cents, or 0.8%, to $103.15 a barrel at 0608 GMT. West Texas Intermediate (WTI) crude was down $1.18, or 1.2%, to $97.44 a barrel.
The new COVID-19 lockdowns have deflated a brief rebound seen in June for factory activity in China, the world's largest importer of crude oil.
Japanese manufacturing activity expanded at the weakest rate in 10 months in July, data released on Monday.
The Caixin/Markit manufacturing purchasing managers' index (PMI) eased to 50.4 in July from 51.7 in the previous month, well below analysts' expectations, data showed on Monday.
China's disappointing manufacturing PMI is the main factor putting pressure on oil prices today. The data shows a startling contraction in economic activity, suggesting that the world's second-largest economy's recovery from covid restrictions may not be as positive as previously expected, darkening the demand outlook for crude oil markets.
Brent and WTI closed July with their second consecutive monthly losses for the first time since 2020, as rising inflation and higher interest rates fueled fears of a recession that would erode fuel demand.
Fuel sales to drivers in the UK are said to be declining, with gasoline demand below its five-year average for this time of year.
In a survey reflecting this, analysts lowered their forecast for 2022 average Brent prices to $105.75 per barrel for the first time since April. Their forecast for WTI fell to $101.28.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, a group is known as OPEC+, will meet on Wednesday to decide on September production.
The meeting came after US President Joe Biden visited Saudi Arabia last month.
According to the information received, two of the eight OPEC+ sources will demand a modest increase for September at the 3 August meeting, while the rest will likely demand production to hold steady.
While President Biden's visit to Saudi Arabia could not spark an immediate oil output, there are those who believe the Kingdom will respond by continuing to gradually increase production.
Haitham al-Ghais, the new secretary-general of the OPEC+ group, reiterated on Sunday that Russia's OPEC+ membership is vital to the agreement's success.
According to Baker Hughes, U.S. oil production continued to rise as the number of rigs rose by 11 in July to a record high for the 23rd consecutive month.
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