Oil prices drop on weak China, Japan data

Oil prices drop on weak China, Japan data

Oil prices fell on Monday as weak manufacturing data from China and Japan weighed on the outlook for demand while investors braced for the meeting of officials from OPEC and other top producers on supply adjustments.

The price of crude futures was down 82 cents, or 0.8%, at $103.15 a barrel at 0608 GMT. U.S. crude was down $1.18, or 1.2%, at $97.44 a barrel.

A rebound seen in June for factory activity in China, the world's largest crude oil importer, has been snuffed out by fresh COVID 19 lockdowns. The PMI of the Caixin Markit manufacturing purchasing managers was down to 50.4 in July from 51.7 in the previous month, well below analysts' expectations, according to the data released on Monday.

CMC Markets analyst Tina Teng said that China's disappointing manufacturing PMI was the main factor that pressed on oil prices today. The data shows a surprising contraction of economic activities, suggesting that the recovery of the world-second largest economy from the covid lockdowns may not be as positive as previously anticipated, which has darkened the demand outlook for crude oil markets.

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

Analysts reduced their forecast for the average Brent price for 2022 to $105.75 a barrel in a Reuters poll for the first time since April. Their estimate for WTI fell to $101.28.

The Organization of the Petroleum Exporting Countries OPEC and allies, including Russia, will meet on Wednesday to decide on September output.

Two of eight OPEC sources said a modest increase for September would be discussed at the Aug. 3 meeting, while the rest said output would likely be held steady.

The meeting came after U.S. President Joe Biden visited Saudi Arabia last month.

U.S. oil production continued to climb as the rig count rose by 11 in July, increasing for a record 23 rd month in a row, according to Baker Hughes.

A break for Brent prices below the key support level of $102.68 could cause a drop into the range of $99.52 to $101.26, according to Wang Tao, technical analyst.