Oil falls on concerns over weak demand from Chinese factory data fan

SINGAPORE, Aug. 1 (Reuters) – Oil prices fell Monday as weak manufacturing data from China and Japan for July weighed down the demand outlook, as investors braced for this week’s meeting of OPEC officials and other top producers on supply adjustments.

Brent crude futures fell $1.19, or 1.1%, to $102.78 a barrel at 0212 GMT. US West Texas Intermediate crude stood at $97.19 a barrel, down $1.43 or 1.5%.

New COVID-19 lockdowns ended a brief recovery seen in June for factory operations in China, the world’s largest crude oil importer. The Caixin/Markit manufacturing purchasing managers index (PMI) fell from 51.7 in July to 50.4 in July, well below analyst expectations, data showed on Monday. read more

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Japanese manufacturing activity grew at its weakest pace in 10 months in July, data showed on Monday. read more

“China’s disappointing manufacturing PMI is the main factor depressing oil prices today,” said CMC Markets analyst Tina Teng.

“The data shows a surprising contraction in economic activity, suggesting that the recovery of the world’s second-largest economy from the covid lockdowns may not be as positive as previously expected, affecting the demand outlook for crude markets. oil darkened.”

Brent and WTI ended July with their second consecutive monthly losses for the first time since 2020, as rising inflation and higher interest rates raise fears of a recession that would erode fuel demand.

ANZ analysts said fuel sales to drivers in Britain were declining, while demand for petrol remained below the five-year average for this time of year.

As a result, analysts in a Reuters poll lowered their 2022 forecast of the average Brent price to $105.75 a barrel for the first time since April. Their estimate for WTI fell to $101.28. read more

The Organization of Petroleum Exporting Countries (OPEC) and allies, including Russia, a group known as OPEC+, will meet on Wednesday to decide on September’s output.

Two of the eight OPEC+ sources in a Reuters poll said a modest increase for September would be discussed at the August 3 meeting, while the rest said production would likely remain stable. read more

The meeting comes after US President Joe Biden visited Saudi Arabia last month.

“While President Biden’s visit to Saudi Arabia did not bring immediate oil deliveries, we believe the Kingdom will respond by continuing to gradually increase production,” RBC Capital analyst Helima Croft said in a note.

In early August, OPEC+ completely reversed the record production cuts since the COVID-19 pandemic broke out in 2020.

The group’s new secretary general, Haitham al-Ghais, reiterated on Sunday that Russia’s membership in OPEC+ is vital to the success of the agreement, Kuwaiti newspaper Alrai reported. read more

Meanwhile, US oil production continued to rise as the number of rigs increased by 11 in July, a record 23rd straight month, data from Baker Hughes shows.

A break for Brent prices below the key support level of $102.68 could lead to a decline in the $99.52 to $101.26 range, Reuters technical analyst Wang Tao said.

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Reporting by Florence Tan; Editing by Kenneth Maxwell and Bradley Perrett

Our Standards: The Thomson Reuters Trust Principles.

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