Oil sinks about 4% after weak factory data raises demand concerns

  • Factories squeezed by rising prices and weak demand
  • OPEC+ is due to meet on Wednesday to discuss production
  • OPEC+ expected to weigh keeping oil production steady or a small uptick – sources

NEW YORK, Aug 1 (Reuters) – Oil prices fell around 4% on Monday as weak manufacturing data in several countries weighed on demand prospects as investors braced for this week’s meeting of OPEC and its producer allies on the offer.

Brent crude futures fell $3.94, or 3.8%, to settle at $100.03 a barrel, after falling to a session low of $99.09 a barrel.

U.S. West Texas Intermediate crude fell $4.73, or 4.8%, to settle at $93.89 a barrel, after hitting a low of $92.42.

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

Factories in the United States, Europe and Asia struggled to gain momentum in July as lower global demand and strict COVID-19 restrictions in China slowed production, data showed. surveys on Monday, likely adding to fears that economies could slide into recession. Read more

Brent and WTI both ended July with a second consecutive monthly loss for the first time since 2020, as soaring inflation and rising interest rates raised fears of a recession that would erode fuel demand.

Analysts in a Reuters poll cut their forecast for average Brent prices in 2022 to $105.75, their first downward revision since April. Their estimate for WTI fell to $101.28. Read more

However, global supply questions are looming in the oil market.

“There’s always a disconnect with the economic data and what we’re seeing on the supply side,” said Price Futures Group analyst Phil Flynn. “The oil market is still very tight, and the market is going to be nervous as OPEC approaches.”

The Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, meet on Wednesday to decide on September production.

Two of eight OPEC+ sources in a Reuters survey said a modest increase for September would be discussed at the Aug. 3 meeting. The rest said production should remain stable. Read more

US President Joe Biden visited Saudi Arabia last month.

“While President Biden’s visit to Saudi Arabia produced no immediate oil deliverables, we believe the kingdom will reciprocate by continuing to ramp up production,” RBC Capital analyst Helima Croft said in a note. .

While OPEC+ aimed to have completely reversed its record production cuts by this month, data showed the group in June was still nearly 3 million barrels per day short of its output target. , with some producing countries struggling to bring wells back into service. Read more

Also weighing on prices was the rise in Libyan oil production, which reached 1.2 million bpd, from 800,000 bpd on July 22, after the lifting of a blockade on several oil installations.

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Reporting by Stephanie Kelly in New York; additional reporting by Ahmad Ghaddar in London and Florence Tan in Singapore; Editing by Marguerita Choy and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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