London — Oil prices dropped on Monday as weak manufacturing data from China and Japan weighed on the demand outlook while investors braced for this week’s meeting of officials from OPEC and other top crude producers on supply adjustments.
Brent crude futures were down $1.42, or 1.4%, at $102.55 a barrel by 1017 GMT. U.S. West Texas Intermediate crude was down $1.85, or 1.9%, at $96.77.
Fresh COVID-19 lockdowns snuffed out a brief recovery for factory activity in China, the world’s largest crude oil importer. The Caixin/Markit manufacturing purchasing managers’ index (PMI) eased to 50.4 in July from 51.7 the previous month, well below analyst expectations, data showed on Monday.
Japanese manufacturing activity expanded at its weakest rate in 10 months in July, data showed on Monday.
“[China] was already facing an uphill challenge, to put it mildly, with regards to its growth target this year and the fact that manufacturing activity is slowing again doesn’t bode well,” said Oanda analyst Craig Erlam.
Brent and WTI ended July with second straight monthly losses for the first time since 2020 as soaring inflation and higher interest rates raise fears of a recession that would erode fuel demand.
Analysts in a Reuters poll reduced for the first time since April their forecast for 2022 average Brent prices to $105.75 a barrel. Their estimate for WTI fell to $101.28.
The Organization of the Petroleum Exporting Countries (OPEC)and allies including Russia, together known as OPEC+, meet on Wednesday to decide on September output.
Two of eight OPEC+ sources in a Reuters survey said that a modest increase for September would be discussed at the Aug. 3 meeting. The rest said output is likely to be held steady.
The meeting comes after U.S. President Joe Biden visited Saudi Arabia last month.
“While President Biden’s visit to Saudi Arabia produced no immediate oil deliverables, we believe that the kingdom will reciprocate by continuing to gradually increase output,” RBC Capital analyst Helima Croft said in a note.
The start of August sees OPEC+ having fully unwound record output cuts in place since the COVID-19 pandemic took hold in 2020.
The group’s new secretary general, Haitham al-Ghais, reiterated on Sunday that Russia’s membership of OPEC+ is vital for the success of the agreement, Kuwait’s Alrai newspaper reported.
Also weighing on prices was a rise in Libyan oil production, which hit 1.2 million barrels per day (bpd), up from 800,000 bpd on 22 July, after the lifting of a blockade on several oil facilities.
Meanwhile, U.S. oil production continued to climb. The country’s rig count rose by 11 in July, increasing for a record 23rd month in a row, data from Baker Hughes showed.
A break for Brent prices below key support level of $102.68 could trigger a drop into a range of $99.52 to $101.26, said Reuters technical analyst Wang Tao.
*Ahmad Ghaddar, Florence Tan, Editing: David Goodman – Reuters
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