Oil prices slid to fresh four-month lows Monday as a rise in the number of U.S. oil rigs fueled supply glut concerns even as weak China manufacturing activity weighed on the demand outlook.
West Texas Intermediate crude for delivery in September dropped 73 cents, or 1.6%, to $46.39 a barrel in electronic trading. The contract briefly traded as low as $46.26, a level not seen since March by a most-active contract, according to FactSet data. WTI slid 2.9% on Friday, ending up with its biggest monthly percent drop since 2008.
Brent crude on London’s ICE Futures exchange fell $1.23, or 2.4%, to $50.98 a barrel.
The oil-rig count in the U.S. rose by five to 664 in the latest week, according to Baker Hughes Inc. This offset the positive impact of signs that the country’s oil production might have peaked and has begun to decline in the past two months.
The supply-side concerns also rose as Iran’s oil minister said the country can increase oil production in one week after international sanctions are lifted, ANZ said in a report.
In China, the Caixin manufacturing purchasing managers’ index, a gauge of nationwide manufacturing activity, fell to a two-year low of 47.8 in July, compared with 49.4 in June.
Though Chinese oil imports have held steady despite a stream of negative economic data from the country, any sign of weakness in China’s demand has been enough to drive the market further into a bearish mode.
Demand is currently near seasonal peak levels and will fall in the second half of the year, Morgan Stanley said in a report. The firm said supply pressures could increase in 2016 as sanctions on Iran might be lifted.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.