Crude prices have dived in Asia, with US oil trading below the key $US40 a barrel mark amid deepening concerns about weak Chinese economic growth and global oversupply.
US benchmark West Texas Intermediate (WTI) for October delivery fell $US1.04 to $US39.41 while Brent crude for October eased US91c to $US44.55 in late-morning trade.
WTI extended losses after briefly dipping to $US39.86 on Friday in New York — breaking $US40 for the first time in six years — after data showed an increase in US oil rigs despite ample global supplies.
“Soft manufacturing data from China and continued increase in weekly rig count led to the sharp sell-off” in oil prices, said Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at consultancy EY.
The Baker Hughes US oil rig count showed producers in the world’s top crude consumer added two more rigs in the week to August 21, the same number as the previous week, bringing the overall tally of active drilling oil rigs to 674.
A much weaker-than-expected manufacturing report on Friday also added to concerns energy demand is also waning in China.
The Caixin’s Purchasing Managers’ Index came in at 47.1 this month, falling from 47.8 in July and its worst reading since March 2009. A reading below 50 signifies contraction in activity.
The poor data fuelled concerns about the world’s second-largest economy and top energy importer — already heightened by Beijing’s unexpected devaluation of the yuan two weeks ago — at a time when high production levels and weak demand growth are weighing on prices.
Oil dealers will next be scrutinising preliminary US second-quarter gross domestic product data to be released on Thursday, analysts said.
The data could be key to the Federal Reserve’s timeline for raising interest rates, with predictions for a September raise fading in the face of global growth jitters.
Interest rate adjustments are closely watched by crude investors as an increase usually leads to a pick-up in the US dollar. A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies, denting demand