Oil prices fell sharply on Monday after weak economic data from China raised fears that a slowing global economy will reduced demand for energy products.
West Texas Intermediate crude for September
delivery fell $4.47, or 4.8%, to $87.61 a barrel, after closing down 2.4% to $92.09 a barrel on Friday, but rose 3.4% on a weekly basis.
October Brent crude
the global benchmark, dropped $4.51, or 4.6%, to $93.61 a barrel. Brent fell 1.4% to $98.14 a barrel on ICE Futures Europe on Friday, rising 3.4% for the week.
Back on Nymex, September gasoline
tumbled 4.1% to $2.919 a gallon, but jumped 6.7% last week. September heating oil
fell 3.3% to $3.399 a gallon, gaining 9.4% last week.
September natural gas
dropped 1.4% to $8.64 per million British thermal units, gaining 8.7% last week.
A batch of data out of China at the start of the week suggested fading growth in the world’s second biggest economy. Industrial productio and retail sales came in lower than the previous month and shy of analysts forecasts.
“Chinese economic data revealed the ongoing impact of COVID-19 lockdowns and an escalating property crisis…In response, China’s central bank unexpectedly cut key lending rates overnight in an effort to stimulate activity, which removed some of the pain resulting from the releases,” Richard Hunter head of markets at Interactive Investor, told clients in a note.
“Crude oil futures trade lower after China’s economic recovery unexpectedly weakened in July on renewed Covid lockdowns and after data from Bloomberg showed an apparent 10% year-on-year drop in oil demand last month,” said Ole Hansen, head of commodity strategy at Saxo Bank.
But the prospect of waning demand from the global manufacturing powerhouse is weighing on energy markets.
Speculation that an EU proposal to revive the 2015 Iran nuclear deal could be agreed, thereby raising the prospect for more Iranian supply, was also weighing on prices, Hansen noted.
The latest pull back in crude futures takes oil back close to its cheapest since February, before Russia’s invasion of Ukraine caused a spike in energy costs.
Meanwhile, there were further signs that inflationary pressures for U.S. households were continuing to ease as natural gas and gasoline futures tracked oil prices lower.
Gasoline futures feed into prices on the forecourt, and U.S. motorists have enjoyed many days of declining prices that have taken regular-grade gasoline down 45 cents over just the past three weeks to $4.10 per gallon.
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