Oil prices fell significantly last night in concerns of the resurgence of Covid-19 and in response to the slowdown in China’s factory activity in July that grew at the slowest pace in 17 months.
The West Texas Intermediate (WTI) for September delivery fell $2.69/bbl or 3.6% to close at $71.26 a barrel. Meanwhile, the international benchmark Brent crude for October delivery decreased $2.52/bbl or 3.3% to close at $72.89 a barrel.
Asia Wealth Securities (AWS) stated that U.S. manufacturing index in July was at 59.5 points (lower than expected at 60.9) decreased from June at 60.6 points and China’s manufacturing PMI in July was 50.3 points (lower than expected at 51.1 points), down from 51.3 points in June. PMI in July was at its lowest level since August 2020. The decline in U.S. and China manufacturing indexes hurt crude oil prices as they are the main economies that use oil the most.
AWS viewed it as a negative sentiment towards oil play stocks in the short term. However, the latest OPEC crude oil production report for July was 26.72mn bpd (The highest since April 2020) which increased 610,000 barrels per day from June.
However, the increase in oil production by OPEC is in line with the OPEC+ meeting’s resolution to increase production by 400,000 barrels per day per month from August to December 2021.