As major petroleum producers gather this week to decide whether to raise supply, investors took in a gloomy prognosis for fuel demand and the statistics showing a worldwide manufacturing slowdown. This led to another decline in oil prices on Tuesday.
As of 0421 GMT, WTI crude futures were down 67 cents, or 0.7 percent, to $93.22 per barrel, while Brent crude futures were down 77 cents, or 0.8 percent, to $99.26 per barrel.
The decline followed a Monday session low for Brent futures of $99.09 a barrel, its lowest level since July 15. The benchmark price for U.S. crude fell as low as $92.42 a barrel, its lowest level since July 14.
“Crude prices tumbled after a wealth of factory activity data suggested the world is headed towards a giant global economic contraction, and on expectations for more oil output following a very good earnings season for oil companies,” noted senior market analyst Edward Moya from OANDA in a note.
Concerns over a possible recession increased on Monday when surveys from the US, Europe, and Asia revealed that factories failed to gain momentum in July. Production was slowed down by China’s rigorous COVID-19 regulations and waning worldwide demand.
The price declines also occur while market investors wait for the conclusion of a meeting on Wednesday between OPEC and its partners, including Russia, collectively known as OPEC+, to decide on September output.
Two out of eight OPEC+ sources surveyed by Reuters indicated that the meeting on August 3 would discuss a minor increase for September. The rest of the output is probably going to remain constant.
According to a correspondent for Fox Business, Saudi Arabia will pressure OPEC+ to boost oil production at the summit.
“The upward momentums of oil prices has been gradually fading … Once the supply and demand situation shows any sign of further deterioration, oil is likely to lead the decline among commodities,” Haitong Futures analysts said.
In the meantime, the US imposed sanctions on Chinese and other companies on Monday in an effort to put more pressure on Tehran to curtail its nuclear programme. The US claimed that these companies assisted in the sale of Iranian oil and petrochemical products to East Asia worth tens of millions of dollars.
The likelihood that Nancy Pelosi, the Speaker of the US House, will travel to Taiwan despite Beijing’s warnings against it also casts a shadow over the market. An increase in tensions between the United States and China may result from the visit, which would be the first high-profile American official to visit the island in more than 25 years.