Oil Down Over Disappointing Chinese Data, Increased OPEC+ Oil Output

© Reuters.

By Gina Lee

AiVIF.com – Oil was down Monday morning in Asia, as concerns over a slowing economic recovery in China, the second-largest oil consumer globally, clouded the fuel demand outlook. Investors were also looking ahead to the Organization of the Petroleum Exporting Countries and allies (OPEC+) increasing its oil output.

Brent oil futures slid 1.05% to $74.62 by 1:12 AM ET (5:12 AM GMT) and WTI futures fell 0.92% to $73.27.

China’s Caixin manufacturing purchasing managers’ index (PMI) released earlier in the day, was a lower-than-expected 50.3 in July. The manufacturing and non-manufacturing PMIs, released on Saturday, were 50.4 and 53.3.

Higher raw material costs, equipment maintenance, recent floods, and the latest outbreak of COVID-19 19 weighed on business activity in the country, with the pace of growth the slowest in nearly a year and a half.

"China has been leading economic recovery in Asia and if the pullback deepens, concerns will grow that the global outlook will see a significant decline... the crude demand outlook is on shaky ground and that probably will not improve until global vaccinations improve," OANDA senior analyst Edward Moya told Reuters.

OPEC+’s July oil output reportedly rose to its highest level since April 2020. The cartel will further ease existing production curbs from Aug 1. onwards, while Saudi Arabia, the biggest oil exporter globally, phased out its voluntary supply cut.

On the COVID-19 front, the number of global daily cases continues to increase. However, it is hoped that higher vaccination rates could avert the need for the harsh restrictive measures that led to sharp drops in fuel demand in 2020.

The U.S. will not order a lockdown, but "things are going to get worse" as the Delta variant of the virus fuels a surge in daily cases in mostly unvaccinated populations, U.S. National Institute of Allergy and Infectious Diseases director Anthony Fauci said on Sunday.

In India, the third-largest oil importer globally, July’s daily gasoline consumption exceeded pre-COVID-19 levels. States across the country relaxed COVID-19 lockdowns while gasoil sales were low, an indication of subdued industrial activity

Meanwhile, Iran is likely to be behind Thursday’s attack on an Israeli-managed petroleum product tanker off the coast of Oman, the U.S. and the U.K. said on Sunday. The attack killed a Briton and a Romanian, with the U.S. and U.K. vowing to work with partners for a response.