Oil drops as weak China factory data fan demand concerns

SINGAPORE, Aug 1 (Reuters) – Oil prices tumbled on Monday as weak manufacturing data from China and Japan for July weighed on demand prospects as investors braced for this week’s meeting. officials from OPEC and other major producers on supply adjustments.

Brent crude futures were down $1.19, or 1.1%, at $102.78 a barrel at 0212 GMT. U.S. West Texas Intermediate crude was at $97.19 a barrel, down $1.43, or 1.5%.

New COVID-19 shutdowns have snuffed out a brief recovery seen in June for factory activity in China, the world’s largest crude oil importer. The Caixin/Markit manufacturing purchasing managers’ index (PMI) fell to 50.4 in July from 51.7 the previous month, well below analysts’ expectations, data showed on Monday. Read more

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Japanese manufacturing activity grew at its weakest pace in 10 months in July, data showed on Monday. Read more

“China’s disappointing manufacturing PMI was the main factor putting pressure on oil prices today,” said CMC Markets analyst Tina Teng.

“The data shows a surprising contraction in economic activity, suggesting that the recovery of the world’s second-largest economy from the covid shutdowns may not be as positive as expected, which has clouded the demand outlook for crude oil markets.”

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

ANZ analysts said fuel sales to UK drivers were down, while demand for petrol remained below its five-year average for this time of year.

Reflecting this, analysts in a Reuters poll have cut their forecast for average Brent prices in 2022 to $105.75 a barrel for the first time since April. Their estimate for WTI fell to $101.28. Read more

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, a group known as OPEC+, will 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, while the others said output would likely be held steady. Read more

The meeting comes after 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 statement. note.

In early August, OPEC+ implemented record production cuts fully reversed since the COVID-19 pandemic took hold in 2020.

The group’s new general secretary, Haitham al-Ghais, reiterated on Sunday that Russia’s membership of OPEC+ is vital for the success of the deal, Kuwaiti newspaper Alrai reported. Read more

Meanwhile, U.S. oil production continued to rise as the number of rigs rose by 11 in July, rising for a record 23rd consecutive month, according to data from Baker Hughes.

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

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Reporting by Florence Tan; Editing by Kenneth Maxwell and Bradley Perrett

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