Oil suffers second day of steep sell-offs

[NEW YORK] Oil prices dived on Monday, with Brent crude tumbling about five percent, after new data showed weakening US and Chinese manufacturing and amid worries about the global supply glut.

US benchmark West Texas Intermediate plummeted 4.1 per cent for September delivery, shedding US$1.95 to close at US$45.17 a barrel on the New York Mercantile Exchange.

Brent North Sea crude for September finished at US$49.52 a barrel, down US$2.69 (5.2 per cent) from Friday's settlement on the Intercontinental Exchange in London.

The rout on the oil market extended Friday's sharp losses, of more than two percent, after Opec said it would not cut production in the face of falling prices.

Fresh manufacturing data on both the United States and China, the world's two largest economies and energy consumers, darkened the outlook for oil demand.

A key private economic indictor on the Chinese manufacturing sector, Caixin's purchasing managers index, plunged in July to a two-year low of 47.8, deeper into contraction territory. A reading of 50 marks the line between growth and contraction. The official PMI showed a drop to 50.0 in July from 50.2 in June.

"We have increased fears for demand from the idea Chinese manufacturing conditions have slowed again," said Gene McGillian of Tradition Energy.

In the US, the Institute for Supply Management's purchasing managers index showed manufacturing activity cooled to 52.7 in July from 53.5 in June.

"Any turnaround in manufacturing will be gradual given the soft demand abroad, reduction in energy-related investment, and past appreciation in the US dollar," said Ryan Sweet of Moody's Analytics.

On the supply side, adding to long-running concerns about the global glut were comments by the Iranian oil minister, Bijan Zanganeh, about Iran's ramp-up of oil exports once sanctions are lifted as part of the country's deal with six major powers to limit its nuclear programme.

"He believes that they will already rise by 500,000 barrels per day just a week after sanctions are lifted, increasing by one million barrels after just one month. Even though we regard this scenario to be unrealistic, it is contributing to the decline in oil prices today," Commerzbank analysts said in a market note.

Prices were also facing downward pressure following "signs that top producers in the Middle East were continuing to pump at record levels despite a growing global glut," said Singapore's United Overseas Bank in a market commentary.

AFP