By Peter Nurse
Investing.com -- Oil prices slumped Monday, weighed by concerns over slowing Chinese economic growth as well as raised potential for increased supply from both Iran and Saudi Arabia.
U.S. Gasoline RBOB Futures were down 4.8% at $2.9004 a gallon.
Economic data released earlier Monday showed China’s economic growth rate unexpectedly slowed in July, prompting the country’s central bank to cut key lending rates in a surprise move.
China's economy, the world’s second largest, is struggling to shake off the June quarter's hit to growth from strict COVID restrictions, and this has raised concerns that this will hit future crude demand from the largest importer in the world.
Additionally, Chinese output data for July showed that domestic refiners processed the least crude oil since March 2020, whilst apparent oil demand also fell, by almost 10% YoY.
“Clearly, given China’s COVID policy, Chinese oil demand remains a downside risk for the market,” said analysts at ING, in a note.
On the supply side, Iran said it will inform the European Union of its official position on a draft text to revive the 2015 nuclear accord by Monday night.
“If the US shows a realistic approach and flexibility, we can reach the point of an agreement in the next few days,” Iranian Foreign Minister Hossein Amir-Abdollahian said.
The market has taken these positive noises from Iran as signaling that it’s ready to compromise to revive the UN-backed plan on lifting sanctions, which could result in the restoring of its oil exports to global markets in the near future.
Additionally, Saudi Aramco 's (TADAWUL: 2222 ) CEO Amin Nasser said on Sunday, while announcing massive quarterly profits , that the state-owned energy giant stands ready to raise crude oil output to its maximum capacity of 12 million barrels per day if requested to do so by the Saudi Arabian government.
“Sentiment in the oil market remains fairly negative,” ING added. “This is reflected in market positioning data, which shows that speculators continue to reduce their net long [positions].”
Over the last reporting week, speculators reduced their net long positions in ICE Brent to the smallest net long seen since November 2020, while NYMEX WTI positions fell to the smallest net long since April 2020.
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