Summary
- China’s July refinery output lowest since March 2020, data shows
- Stronger U.S. dollar and low liquidity pressure prices
- Coming up: Iran to respond to EU nuclear text on Monday
Oil prices dropped by more than $4 a barrel on Monday on-demand fears as depressing Chinese economic data revived global recession concerns. Brent crude futures slid $4.35, or 4.43%, to $93.80 a barrel by 1351 GMT after standing 1.5% lower on Friday.
U.S. West Texas Intermediate crude fell $4.23, or 4.59%, at $87.86 after sliding 2.4% in the previous session. Brent futures neared their lowest since before Russia invaded Ukraine on Feb. 24, while WTI futures hit their lowest on Monday since the start of February. Brent crude open interest this month fell 20% from August 2021.
“Open interest is still falling, with some (market players) not interested in touching it because of volatility. That is, in my view, the reason resulting in higher volumes to the downside,” UBS oil analyst Giovanni Staunovo said, adding that the cause for the fall on Monday was inadequate Chinese data.
Related: Oil Rises On New Gasoline Demand, Weak Dollar
The Chinese central bank, the world’s leading crude importer, lowered lending rates to restore demand as data showed the economy dampening unexpectedly last month, with retail and factory activity squeezed by a property crisis and Beijing’s zero-COVID policy.
The country’s refinery output dropped to 12.53 million barrels per day (bpd), its smallest since March 2020, government data showed. ING bank reduce its forecast for China’s 2022 GDP growth to 4%, lower compared to a previous forecast of 4.4%, warning that another decline is possible.
The U.S. Dollar Index Impact On Oil
Oil is normally priced in U.S. dollars, thus a stronger greenback makes the commodity more costly to holders of other currencies.
Talks to renew the 2015 Iran nuclear deal were also in focus on Monday. Oil supply could increase if Iran and the United States enter an agreement with European Union, which would eliminate sanctions on Iranian oil exports, analysts said.
Iran will respond by midnight on Monday to the European Union’s “final” draft text to protect a 2015 nuclear deal, its foreign minister said, requesting the United States to show flexibility to settle three remaining issues.
