Oil Prices at near 4-mth low on Fears of Slowing Demand
2022.08.02 03:37
By Ambar Warrick
Investing.com– Oil prices extended their declines on Tuesday, with U.S. futures hitting a near four-month low as signs of slowing manufacturing activity across the globe drove fears of a drop in crude demand.
As of 2014 ET (1215 GMT), U.S. Crude Oil WTI Futures were down 0.2% at $93.66- close to their lowest level since early April. London-traded Brent Oil Futures fell 0.4% and traded below $100 for the first time in over a week.
WTI futures had sunk over 4% on Monday, while Brent oil futures had lost 3.8% following a swathe of negative manufacturing data from across the globe.
Data showed that China’s industrial sector had unexpectedly shrunk in July, as had Eurozone manufacturing activity.
ISM manufacturing indicators for the United States also showed a slowdown in growth in July, although the country remained in expansion territory.
A separate survey by ratings agency S&P Global put U.S. factory output at its weakest level in two years in July.
“The rising cost of living is the most commonly cited cause of lower sales, as well as the worsening economic outlook,” Chris Williamson, Chief Business Economist at S&P Global Market Intelligence wrote in a note.
“Companies are also taking an increasingly cautious approach to purchasing and inventories amid the gloomier outlook, and likewise appear to be cutting back on investment.”
With inflation and interest rates rising rapidly this year, business activity, and in turn, crude demand, is expected to be subdued in the coming months.
Focus now turns to a meeting of the Organization of Petroleum Exporting Countries and Allies (OPEC+) on Wednesday, where the group will decide on future crude supply.
The group had recently rolled back pandemic-era cuts to oil supply, and is now expected to keep production steady.
While the group faces pressure from the United States to increase production, most OPEC+ members will be hesitant to release more oil into volatile markets. A drop in global crude demand is also likely to spur supply cuts in order to keep prices steady.
