Oil prices fell after disappointing economic data from China renewed concerns that a global recession would reduce demand for fuels.
Brent crude futures lost $3.05, or 3.11%, to $95.10 a barrel, after falling 1.5% on Friday. US West Texas Intermediate futures fell $2.68, or 2.91%, to $89.41 a barrel, after falling 2.4% in the previous session.
Brent futures traded near their lowest level since before Russia sent troops to Ukraine on February 24, while WTI futures hit their lowest level since early February on Monday.
The central bank of China, the world’s biggest crude importer, cut interest rates on loans to revive demand, at a time when data showed the economy unexpectedly slowed in July, with industrial and retail activity stifled by Beijing’s zero COVID policy and a housing crisis.
The country’s refinery output fell to 12.53 million barrels per day (bpd), its lowest level since March 2020, according to government data.
ING bank cut its forecast for China’s GDP growth in 2022 to 4%, down from a previous projection of 4.4%, and warned that a further downgrade is possible.
Open interest, which is the total number of futures contracts market traders hold at the end of the day, on Brent crude this month is down 20% from August last year.
“Open interest continues to fall, with some (market players) not interested in touching it due to volatility. That is, in my opinion, the reason that results in higher volumes to the downside,” said the oil analyst at UBS CEO Giovanni Staunovo, adding that the trigger for Monday’s decline was weak data from China.
Added to this is the renewed strength of the dollar. The dollar index, which measures the performance of the greenback against six pairs, rose 0.79% to 106.52 units. Oil is generally priced in dollars, so a stronger US currency makes the commodity more expensive for holders of other currencies.
Talks to revive the 2015 Iran nuclear deal were also in the spotlight on Monday. Crude supply could rise if Iran and the United States accept an offer from the European Union, which would lift sanctions on Iranian oil exports, analysts said.
With information from Reuters.
