LONDON: Oil prices dropped, sending Brent crude back below $75 a barrel after a report showed Chinese factory activity declined as the world’s second largest oil consumer battles a resurgence in coronavirus infections.
Brent crude dropped 2 percent to $74.81 a barrel at 2:15 p.m. in London, after ending July at the highest level in more than two weeks.
The international oil benchmark climbed 2.5 percent last week after a rollercoaster month that saw it swoon from a two-year high of $77.16 on July 5 to $68.62 on July 19 before recovering to end the month at $76.33.
Concerns over the effect a resurgence in coronavirus cases might have on demand for crude were allayed on Wednesday when a report showed a bigger-than-expected drawdown of crude stockpiles the previous week.
US West Texas Intermediate (WTI) crude futures dropped 0.8 percent today to $73.24.
Chinese factory activity slowed in July to its lowest level since the start of the pandemic, data showed Saturday, as manufacturing was impacted by slowing demand, weak exports and extreme weather.
The Purchasing Managers’ Index (PMI), a key gauge of manufacturing activity in the world’s second-largest economy, dropped to 50.4 in July from June’s 50.9, the National Bureau of Statistics said. A reading above 50 indicates growth.
“China has been leading economic recovery in Asia and if the pullback deepens, concerns will grow that the global outlook will see a significant decline,” Edward Moya, a senior analyst at OANDA, told Reuters.
Oil prices were also damped by a Reuters survey that showed oil output from the Organization of the Petroleum Exporting Countries (OPEC) rose in July to its highest level since April 2020.
An exchange of words over an attack on an Israeli-managed oil products tanker off the coast of Oman on Thursday appeared to provide little support to the crude market.
Iran will respond promptly to any threat against its security, a foreign ministry spokesman said on Monday, after the US, Israel and the UK blamed Tehran for the attack..