Oil settles lower, pares losses despite weak economic data

© Reuters. FILE PHOTO: A gas pump at a petrol station in Seoul June 27, 2011. REUTERS/Jo Yong-Hak/File Photo

By Laura Sanicola

NEW YORK (Reuters) -Oil prices settled lower on Monday, paring steep losses on weak Chinese economic data after sources told Reuters that OPEC and its allies believe the markets do not need more oil than they plan to release in the coming months.

Brent crude settled down $1.08, or 1.5%, at $69.51 a barrel after earlier falling to $68.14. U.S. oil fell by $1.15, or 1.7%, to $67.29 after reaching lows of $65.73.

The market had dropped more than 3% earlier in the session after data showed Chinese factory output and retail sales growth slowed sharply in July, missing expectations, as flooding and fresh outbreaks of COVID-19 disrupted business activity.

Crude oil processing in China, the world's biggest oil importer, last month also fell to its lowest level on a daily basis since May 2020 as independent refiners cut production in the face of tighter quotas, elevated inventories and falling profits.

However, prices rebounded slightly after sources from OPEC+, which comprises the Organization of the Petroleum Exporting Countries and its allies, said there was no need to release more oil despite U.S. pressure to add supplies to check an oil price rise.

OPEC+ agreed in July to boost output by 400,000 barrels per day a month starting in August until its current oil output reductions of 5.8 million bpd are fully phased out.

Two of the OPEC+ sources said the latest data from OPEC and from the West’s energy watchdog - the International Energy Agency (IEA) - also indicated there was no need for extra oil. {OPEC/M]

The IEA last week said that rising demand for crude oil reversed course in July and was expected to increase at a slower rate over the rest of 2021 because of surging COVID-19 infections from the Delta variant.

U.S. oil output from seven major shale formations is expected to rise by about 49,000 barrels per day (bpd) in September, led by growth in the Permian, according to the Energy Information Administration's monthly drilling productivity report on Monday.

Money managers reduced their net-long U.S. crude futures and options holdings in the week to Aug. 10, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Speculators also cut their futures and options positions in New York and London by 21,777 contracts to 283,601 over the period, the CFTC said.

"With COVID cases rising, the demand outlook is looking unclear, so traders are increasingly wary about hedging and locking in prices," said Phil Flynn, analyst at Price Futures Group.