Oil prices fell on Monday as disappointing data from the US and China complicated the economic outlook and prompted a move away from riskier assets.
International oil benchmark Brent fell as low as $92.78 a barrel as gloomy reports from the world’s two leading economies fueled concerns that a slowdown in global growth will hit industrial and consumer demand. US marker West Texas Intermediate slipped to $86.82, its lowest level since early February – before Russia invaded Ukraine.
Both indicators pared losses later in the day, with Brent settling 3.1 percent at $95.10 and WTI at $89.41, down 2.9 percent.
Monday’s moves came after Chinese economic data showed retail sales rose 2.7 percent year on year in July, while industrial production was up 3.8 percent. Economists had forecast larger gains of 5 percent and 4.6 percent, respectively.
Analysts at Goldman Sachs said the data suggested the growth recovery since the April and May lockdowns fueled by the Omicron Covid-19 variant “has stalled and even reversed slightly in July.” .
“This points to still weak domestic demand amid the sporadic Covid outbreaks, production cuts in some energy-intensive industries and [the] adverse impact of recent risk events in the real estate sector,” they added.
To spur growth, China’s central bank cut its medium-term lending rate, which it uses to lend one-year to the banking system, by 0.1 percentage point to 2.75 percent on Monday.
“Oil markets are struggling to pause as weak macro data continues to exert downward pressure [them]’ said Oilytics analysts, noting that the ‘dark’ Chinese data came after the weak European consumer sentiment read last week.
Traders will also be keeping a close eye on talks to revive the Iran nuclear deal as Tehran weighs a new EU proposal to resume talks. Any progress in lifting sanctions on Iranian exports could boost crude oil markets.
“Oil prices may swing more than a pendulum when it comes to the never-ending nuclear talks with Iran,” said Tamas Varga of PVM Oil Associates.
Data out of the US on Monday added to the gloomy mood over the global growth outlook. A New York Federal Reserve survey of manufacturers showed a negative 31.3 for August versus 11.1 the previous month. Economists polled by Portal had forecast a value of 5. The unexpected plunge in the Empire State gauge marked the second-largest monthly decline for the index on record.
On Wall Street, US stocks posted muted gains after starting the session lower. The S&P 500 ended the day up 0.4 percent, while the tech-heavy Nasdaq Composite gained 0.6 percent. The broad S&P posted its fourth consecutive week of gains last week.
In bond markets, the yield on the 10-year US Treasury fell 0.05 percentage point to 2.8 percent as the benchmark instrument rose in price. US Treasury bonds are typically seen as a haven in times of economic stress.
Market participants on Wednesday will scan the minutes of the Fed’s Federal Open Market Committee’s latest monetary policy meeting for clues to the central bank’s tightening plans.
The dollar gained 0.8 percent against a basket of six major currencies on Monday. In Europe, the regional stock index Stoxx 600 closed 0.3 percent higher. Chinese stocks fell, with the CSI 300 gauge of stocks listed in Shanghai and Shenzhen closing 0.1 percent and Hong Kong’s Hang Seng index slipping 0.7 percent.