Oil drops as China slowdown raises concerns over demand outlook
(Bloomberg) – Oil fell early in the week’s trading, with poor Chinese economic data adding to fears that a global slowdown could undermine demand.
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West Texas Intermediate slipped below $97 a barrel on Monday after falling nearly 7% in July in the first straight monthly loss since late 2020. Data over the weekend pointed to a surprise contraction in stock market activity. Chinese factories, highlighting the cost of mobility curbs to fight Covid epidemics. Purchasing managers’ indices also weakened in South Korea and the four main members of the euro zone.
Oil trading has been volatile in recent months as worries about a slowdown have hurt demand for commodities, although underlying signals point to a still tight physical market. Data last week showed the US economy contracted for a second quarter, while the Federal Reserve raised rates by 75 basis points.
“There are many reasons why oil is falling,” said Giovanni Staunovo, commodities analyst at UBS Group AG. “Weak Chinese and European PMIs, as well as recovery of Libyan production.”
Libyan crude production has rebounded after a series of disruptions that have more than halved supply, according to the OPEC member’s oil minister. National production has returned to 1.2 million barrels per day, a level last seen in early April, Mohamed Oun said in a telephone interview.
Later this week, investors will focus on a meeting of the Organization of the Petroleum Exporting Countries and its allies, with the group setting production policy for September. As the United States pressured Saudi Arabia to loosen the taps, increasing the pressure on Russia, Moscow and Riyadh recently reaffirmed their shared commitment to a stable market.
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