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 Activity in China's manufacturing sector shrank at the fastest pace
in 15 months in July, according to a preliminary private purchasing
managers' survey.
"Concerns around the demand environment were heightened further
today by the PMI (Purchasing Managers' Index) read out of China,"
said Michael McCarthy, chief market strategist at CMC Markets in
Sydney.
Brent crude was down 15 cents at $55.11 a barrel by 1112 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 U.S. summer driving season, helped mitigate the longer-term
effect of a global supply glut.
This cushion, however, is likely to be short-lived.
“You have ... global crude runs peaking right now. The physical
market has done a bit better because European refinery demand has
been very strong. So this is as good as it gets for crude demand,
but we’ve had this wealth of supply come down," Chris Main, an oil
strategist at Citi, said.
U.S. crude for September delivery edged up 18 cents to $48.63 a
barrel, having settled on Thursday down 74 cents at $48.45, the
lowest since March 31.
Main said that, for now, the most-active U.S. crude futures contract
might see some respite from the selling that knocked it to its
lowest in four months.
“We’ve come down $12 in three weeks, so I don’t think people now see
the prompt as necessarily the big sell. Where there is potential is
a bit further down the curve," he said.
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Both benchmarks have seen losses this month, partly due to a
stronger dollar, which makes it more profitable for non-U.S.
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.
WTI crude oil has lost 18 percent in July, the biggest one-month
decline since December and the second-largest monthly loss in the
last seven years.
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.
(Additional reporting by Jacob Gronholt-Pedersen in Singapore;
editing by William Hardy)
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