West Texas Intermediate slid below $97 a barrel Monday after sinking almost 7% in July in the first back-to-back monthly loss since late 2020. Weekend data indicated a surprise contraction in Chinese factory activity, highlighting the cost of mobility curbs to tackle Covid outbreaks. Purchasing managers’ indexes also weakened in South Korea and the euro area’s four largest members.
Oil trading has been volatile in recent months as concerns about a slowdown hurt demand for commodities even as underlying signals point to a still-tight physical market. Data last week showed the US economy shrank for a second quarter, while the Federal Reserve hiked rates by 75 basis points.
“There are many reasons why oil is down,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “Weak Chinese and European PMIs, as well as recovering Libyan production.”
Libya’s crude output has rebounded after a series of disruptions that more than halved supply, according to the OPEC member’s oil minister. Nationwide production has returned to 1.2 million barrels a day, a level last seen in early April, Mohamed Oun said in a telephone interview.
Later this week, investors will turn their focus to a meeting of the Organization of Petroleum Exporting Countries and its allies, with the group setting output policy for September. While the US has lobbied Saudi Arabia to loosen the taps — raising pressure on Russia — Moscow and Riyadh recently reaffirmed their joint commitment to a stable market.