Oil futures ended sharply lower on Monday after clinching their second straight monthly loss in July as recession fears weigh on commodity prices.
September natural gas
dropped 0.7% to $8.283 per million British thermal units.
Support near the previous low around $93 a barrel for WTI “is likely to be tested again this week as selling interest comes to the market. The oil complex is stalling on recession fears and news that Libya’s oil output increased,” said Brian Swan, senior commodity analyst at Schneider Electric, in a note.
“Another main culprit putting pressure on near-term pricing is the weak China manufacturing data weighing on demand,” he wrote.
Chinese manufacturing activity unexpectedly contracted in July, as Beijing’s COVID-19 restrictions and weak demand undercut hopes for a more robust economic revival. The official manufacturing purchasing managers index pulled back to 49.0 in July from 50.2 in June, China’s National Bureau of Statistics said Sunday. The result left the index below the 50 level that separates expansion from contraction and short of the median forecast of 50.3 among economists polled by The Wall Street Journal.
The Institute for Supply Management reported that its closely followed manufacturing gauge dipped to 52.8% in July from a reading of 53% a month earlier. Economists polled by The Wall Street Journal had expected the index to come in at 52.1%. While any number above 50% signifies growth, the latest reading was the weakest since June 2020.
Oil traders were focused on the upcoming meeting of the Organization of Petroleum Exporting Countries and its allies — a group known as OPEC+. The meeting is set for Wednesday.
“With the previous agreement having expired as the group has theoretically unwound all of the pandemic production cuts, attention will now shift to how OPEC+ plans to actually hit those targets and whether any further increases will be announced going forward,” wrote Craig Erlam, a senior market strategist at OANDA, in a note on Monday.
Disappointing economic data out of China and other Asian economies also weighed on oil prices by undercutting hopes for a rebound. The Markit-Caixin purchasing managers index, a monthly indicator of business conditions in China’s manufacturing sector, came in weaker than expected late Sunday — coming in at 50.4, compared with the 51.5 consensus estimate according to FactSet data.