Oil plunges 4% amid recessionary fears

Oil prices slide sharply, as weak manufacturing data from China and Japan in July fueled worries about demand, while scenarios for a deep recession in the eurozone are mounting.

In particular, his contract Brent for October delivery is traded at 100.5 dollars the barrel with losses of almost 3.5 dollars or 3.3%.

The pressures on the American are even greater WTIwhich sees its own September contract take a dive 4.3% or $4.2 with its price moving at 94.4 dollars the barrel.

New coronavirus lockdowns have hit manufacturing in China, the world’s biggest oil importer.

China’s PMI fell to 50.4 in July from 51.7 in the previous month and significantly below analysts’ estimates, it was announced today.

Meanwhile, Japan’s manufacturing activity expanded at its slowest pace in 10 months in July.

At the same time, Barclays’ baseline scenario for a mild recession in the Eurozone was turned into an optimistic one, and the British bank now sees a deep and longer recession – following this “turn” made by Citigroup last week.

In this climate, concerns about an upcoming contraction of economic activity worldwide, which will lead to destruction of demand for energy products, appear to bring a barrage of sales in crude oil.

According to Reuters analyst Wang Tao, the loss of the $102.68 support for Brent now takes the price to the range of $99.52 to $101.26.

Both Brent and WTI ended Friday in July with their second consecutive monthly decline, the first time this has happened since 2020.

Elsewhere, U.S. oil production continued to move higher, with the country’s rig count rising by 11 in July, up for the 23rd consecutive month, a record stretch according to data from Baker Hughes.

Finally, investors’ eyes are expected to turn to the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia (OPEC+), meeting on Wednesday to decide on September output, with expectations to be at least subdued .

Two of the eight agency sources polled by Reuters said a modest output increase would be discussed at the Aug. 3 meeting, while the rest said output would probably be held flat.

In Libya, however, Minister Mohammad Aoun announced yesterday Sunday that the country’s oil production reached 1.2 million barrels per day, i.e. the daily average before the blockade of oil wells from mid-April to mid-July that paralyzed the economy of the unstable north African country.