Oil: Down 3% amid concerns over Chinese growth

Oil prices closed down 3% on Monday – but far from the day’s lows – after a slowdown in the world’s second-largest economy, China, raised fresh fears about global crude demand.

Meanwhile, prospects for a revival of the Iran nuclear deal, which could lead to more global crude supplies, also contributed to losses for oil.

In this climate, US WTI crude for September delivery down $2.68? or 2.9% to $89.41 a barrel. U.S. crude, which rose 3.5 percent last week, closed at its lowest level since Aug. 5, according to Dow Jones Market Data. Alongside, Brent for October delivery lost $3.05, or 3.1%, to $95.10 a barrel. Brent, which rose 3.4% last week, also closed at its lowest level since August 5.

It is noted that China’s economy showed unexpected slowing trends in July, with industrial activity and retail trade under pressure from the zero-Covid policy.

In particular, industrial production in the country increased by 3.8% in July, slowing from the previous 3.9% growth, but mainly significantly lower than the 4.6% increase expected by analysts.

At the same time, retail sales, which had risen 3.1% in June, rose last month by 2.7% year-on-year, further lagging market forecasts for 5% growth.

Traders are selling oil because they “believe oil demand will shift significantly as economic data shows the US economy, the world’s largest economy, and China have slowed,” said Naeem Aslam, chief market analyst at AvaTrade.

Crude prices had rebounded more than 3 percent last week amid production shutdowns at several offshore platforms in the Gulf of Mexico due to a component failure.

With repairs completed on Friday, however, gravity has now returned to levels that will drive demand over the next few months, and as China struggles to cope with the blow to growth brought on by tight pandemic restrictions it appears to have activated re mass sellers.

Additional pressure is on prices from the supply side as the head of the world’s top exporter, Saudi Aramco, said the company is ready to increase output if asked.

In particular, speaking to reporters yesterday Sunday, CEO Amin Nasser said that Saudi Aramco is ready to increase crude oil production to its maximum capacity of 12 million barrels per day if requested by the Saudi government.

“We are confident in our ability to increase to 12 million barrels whenever there is a need or we are asked by the government or the Ministry of Energy,” Nasser said.

According to him, the easing of Covid-19 restrictions in China and activity in the aviation industry may lead to an increase in demand.

Also, expectations surrounding the Iran nuclear deal drove oil prices lower on Monday.

“Traders believe that this deal will go through and Iranian oil will come to market as the US and its allies have little to no options because oil demand will increase as we approach the end of summer,” Aslam said. .

“With the sanctions on Russian oil, the options are limited. So the fear of extra supply coming into the market is hammering prices,” he said.