London: Oil fell 4 per cent on Monday as weak economic data from China, the world’s largest energy consumer, weighed on prices and an OPEC (Organization of Petroleum Exporting Countries) source played down talk of an emergency meeting to stem the decline.
China’s manufacturing sector contracted at the fastest pace since 2012 in January, adding to worries about demand from the world’s second-biggest economy at a time when the market is already weighed down by a large supply overhang.
“The weak China PMI (purchasing managers’ index) is driving down prices because China weighs on the entire commodities sector from the demand side of the equation,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Brent April crude futures were down $1.44, or 4 per cent, at $34.55 a barrel at 1451 GMT (8:21 p.m. in India). The March Brent contract, which expired on Friday, settled at $34.74 a barrel.
US West Texas Intermediate (WTI) was down $1.56, or 4.6 per cent, at $32.06 a barrel.
A senior OPEC source told a Saudi Arabian newspaper it was too early to talk about an emergency meeting of the Organization of the Petroleum Exporting Countries.
Oil prices jumped last week after Russian energy officials said they had received proposals from OPEC lynchpin Saudi Arabia on managing output and were ready to talk.
“We do not expect such a cut will occur unless global growth weakens sharply from current levels, which is not our economists’ forecast,” investment bank Goldman Sachs said in a report.
OPEC member Iran, which last month was allowed to return fully to markets after years of sanctions, is so far unwilling to participate in cuts.
Partly because of Iran’s return, OPEC output has jumped to 32.6 million barrels per day (bpd), its highest in years, adding to supply of more than 1 million bpd in excess of demand which has pulled prices down 70 per cent since mid-2014.
Oil exports from OPEC member Iraq rose in January, its oil ministry said on Monday, reaching an average of 3.285 million bpd, up from 3.215 million bpd the previous month.
However, overall production from its southern fields fell last month from a record high reached at the end of last year.
Brent crude prices have surged more than 30 per cent in just under two weeks since contracts hit a 12-year low.
In a sign investors are speculating on an oil rebound, data from the InterContinental Exchange showed net long positions in Brent rose the most in four years last week.
“Part of the bullish action in Brent crude oil … is from fundamentals in Asia where parts of the oil complex are supportive with very strong China imports of NGL (natural gas liquids) and naphtha, which has put these products in backwardation both in Asia and in Europe,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets in Oslo.