Oil prices fell more than 3% during the week ending August 6, as weak economic data from the US and China fueled demand concerns, although escalating tension in the Middle East supported an upward price trajectory.
International benchmark Brent crude traded at $72.15 at 1130 GMT on Friday, posting more than a 3.2% fall from Monday when trade at 0727 GMT registered at $74.54 per barrel.
American benchmark West Texas Intermediate (WTI) traded at $69.89 at the same time on Friday, decreasing over 4.5% relative to $73.19 a barrel on Monday.
Investors have mainly focused on the Chinese oil demand drop, the bearish US economic data, and increasing oil production from the Organization of Petroleum Exporting Countries and allies, the OPEC+ group, during the week ending August 6.
The lower-than-expected industrial data from China, coupled with the recent coronavirus measures, which include travel restrictions, prompted oil demand concerns in the world’s second-largest consumer.
The country’s Manufacturing Purchasing Manager’s Index (PMI) dropped to 50.4 from June’s 50.9 compared to the market expectation of 50.8. This was the slowest pace since February 2020, the month before the start of the coronavirus pandemic when it came in at 35.7, data from the National Bureau of Statistics (NBS) showed on Saturday.
Data from the US was also discouraging for investors, as crude oil inventories signaled a demand decline with a build of 3.6 million barrels.
US manufacturing showed growth in July but at a slower pace than June, with raw material shortages and consumers shifting their spending from products to services.
US Manufacturing Purchasing Manager's Index (PMI) fell to 59.5 in July, down from 60.6 in June and below the forecast of 60.9.
Prices also came under pressure after the oil supply of OPEC+ producers increased from the beginning of August in line with the group’s decision in July.
The group had agreed to raise output by 400,000 barrels per day from August to December and extended its production cut agreement from April 2022 to December 2022.
Price slumps were contained when tension in the Middle East escalated after Iranian-backed forces were accused of seizing the Mercer Street oil tanker in the Gulf off the coast of the UAE.
Two people, including a British national, were killed during the attack that the US, Israel, and the UK claimed Iran was responsible for.
All three countries warned Iran of joint retaliation, and Israel's defense minister even declared on Thursday that his country “is ready to attack Iran.”
Despite Tehran's denials, the incident adds to the Middle East's years-long escalation and thwarts efforts to revive the US-Iran nuclear deal.
By Sibel Morrow