Oil falls on fuel demand concerns

Oil prices fell on Monday, extending last week’s losses as signs of slowing consumption in China raised concerns that demand for crude is slowing. WTI fell 0.9% to $88.19, while Brent fell 0.6% to $94.06. Both contracts touched their lowest levels since late January. The strength of the U.S. dollar also weighed on crude prices after last week’s excellent jobs data, with market expectations of an aggressive Fed hike rising after the data. Crude markets took a new hit as Chinese import data showed weaker-than-expected growth in July, suggesting a continuing slowdown in demand in one of the world’s largest oil importers. Imports rose at a faster pace than last month, but were the second-lowest this year. Still, China recorded a record trade surplus thanks to strong exports. China’s economic activity has been hit hard this year by COVID-19 lockdowns, with official data released last week showing that the manufacturing sector contracted in July. The data, combined with dismal manufacturing pressures from around the world, showed that oil prices had their worst week since the March 2020 collapse during COVID-19. Stronger-than-expected US employment data on Friday also led investors to expect the Fed to raise interest rates next month, a negative development for oil markets. However, further declines in oil prices could ease inflationary pressures, as rising fuel prices have been the biggest contributor to inflation this year. Attention now turns to key inflation data from the US, China and the eurozone due this week. The stronger-than-expected data could raise concerns that the Fed will increase monetary tightening, pushing oil prices lower.