LONDON: Oil prices neared four-month lows on Friday set for their fourth straight week of declines after data showed a contraction in China’s factory sector and the dollar rose against a basket of currencies.
Data showing activity in China’s manufacturing sector shrank at the fastest pace in 15 months in July adds to concern about demand at a time when the crude market is already oversupplied to the tune of some 2 million barrels per day.
Brent crude was down 28 cents at 54.99 a barrel by 1345 GMT having hit an intraday low of 54.80 its lowest since early April.
Brent has lost nearly 13 percent in July its largest one-month fall since a near 19 percent loss in January although downside has been less severe this week. Prices traded in the tightest weekly range in 11 months as strong seasonal demand particularly for gasoline in the US summer driving season helped mitigate the longer-term effect of a global supply glut.
This cushion however is likely to be short-lived.
iYou have … global crude runs peaking right now. The physical market has done a bit better because European refinery demand has been very strong’ Chris Main an oil strategist at Citi said.
‘So this is as good as it gets for crude demand but weive had this wealth of supply come down.’
US crude for September delivery CLc1 rose 12 cents to 48.57 a barrel having settled on Thursday down 74 cents at 48.45 the lowest since March 31.
Both benchmarks have posted losses this month partly due to a stronger dollar which makes it more profitable for non-US investors to sell commodities and partly on expectations of greater Iranian supply following last week’s deal over Tehran’s nuclear program with world powers.
US crude has lost 18 percent in July the biggest one-month decline since December and the second-largest monthly loss in the last seven years.
‘We won’t see much big (price) movement until we start to see some kind of concrete thoughts on whether (the motion on Iranian) sanctions is likely to pass in the US Congress or not that’s the next big thing on my calendar’ Capital Economics commodities economist Tom Pugh said.
Analysts believe that the prospect of lower oil prices could force the world’s top producers to cut spending as they face the prospect of yet another hit to quarterly profits.
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