Oil extends losses after weak data from China, OPEC+ supply expected to increase | commodities

Oil prices extended losses from late last week on expectations of higher OPEC+ production in October, while signs of sluggish demand in China and the United States raised concerns about future consumption growth.

Brent crude futures were down 20 cents, or 0.3 percent, at $76.73 a barrel by 1221 GMT, while U.S. West Texas Intermediate crude was down 19 cents, or 0.3 percent, at $73.36.

Brent and WTI lost 1.4% and 3.1% respectively on Friday.

Given the downward-sloping pace, there is a real risk that prices will return to a range of multi-month lows, said Chris Weston, head of research at brokerage Pepperstone.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are set to go ahead with planned increases in oil output from October, six sources at the producer group told Reuters.

Eight OPEC+ members are set to raise output by 180,000 barrels per day (bpd) in October as part of a plan to begin reversing their latest level of supply cuts of 2.2 million bpd , while maintaining other reductions until the end of 2025.

There are fears of an even bigger rise in output, which could further tip the supply-demand balance further and put more pressure on prices, said Achilleas Georgolopoulos, investment analyst at brokerage XM.

“These stronger output increases could also come at a time when the global economy is likely to slow, with China continuing to disappoint,” he added.

Both Brent and WTI posted losses for two straight months as concerns over demand from the US and China outweighed recent disruptions in Libyan oil supplies and supply risk from the Middle East conflict.

While Libyan exports remain halted, Arabian Gulf Oil Company has resumed production by up to 120,000 bpd to meet domestic needs, engineers said on Sunday, after factional conflict shut down most of the country’s oil fields.

More pessimism about rising Chinese demand emerged after an official survey showed on Saturday that manufacturing activity fell to a six-month low in August as factory-gate prices fell and landlords fought for orders.

“China’s weaker-than-expected PMI released over the weekend adds to concerns that the Chinese economy will miss growth targets,” said IG market analyst Tony Sycamore.

In the U.S., oil consumption fell in June to seasonal lows last seen during the 2020 COVID-19 pandemic, Energy Information Administration data showed on Friday.

(Reporting by Arunima Kumar in Bengaluru and Florence Tan in Singapore Editing by David Goodman)

First publication: September 02, 2024 | 18:37 IST