| 26 February 2024, Monday |

Oil falls on China COVID curbs and weak factory data

On Monday, oil prices declined as a result of lower than anticipated manufacturing activity data from China and worries that the country’s expanding COVID-19 regulations will reduce demand.

By 1240 GMT, Brent crude futures were down 69 cents, or 0.7%, to $95.08 per barrel, continuing Friday’s 1.2% fall.

After falling 1.3% on Friday, West Texas Intermediate (WTI) crude for the United States was down 84 cents, or 0.9%, at $87.06.

However, both benchmarks are expected to post monthly advances for the first time since May.

Factory activity in China, the world’s largest crude importer, fell unexpectedly in October, an official survey showed on Monday, weighed down by softening global demand and strict COVID-19 restrictions that hit production.

“The purchasing managers’ index (PMI) data contracting adds to the post-China congress party blues for oil markets. It is not difficult to draw a straight line from weaker PMIs to China’s COVID-zero policy,” said Stephen Innes, managing partner of SPI Asset Management.

“So long as COVID-zero remains entrenched, it will continue to thwart oil bulls.”

Chinese cities are stepping up zero-COVID curbs as outbreaks widen, dampening hopes of a rebound in demand.

Strict COVID-19 curbs in China have hit economic and business activity, curtailing oil demand. China’s crude oil imports for the first three quarters of the year fell 4.3% year on year for the first annual decline for the period since at least 2014.

According to an S&P Global poll, the euro zone’s business activity shrank at the sharpest rate in over two years in October, which raises consumer caution and lowers demand. This suggests that the region is on the verge of going into recession.

Policymakers at the European Central Bank are likewise committed to continuing to raise interest rates, even if doing so causes the region to enter a recession and fuels political unrest.

In spite of the energy shift, the Organization of the Petroleum Exporting Countries (OPEC) warned Monday that $12.1 trillion in investments are required to meet the demand for oil over the medium and long term.

  • Reuters