China, the second-largest oil consumer globally, posted a slightly poor economic report which clouded the fuel demand outlook in the near term.
An earlier report by Caixin showed China’s manufacturing purchasing managers’ index (PMI) was 50.3 in July, lower than expected. On Saturday, manufacturing and nonmanufacturing PMIs came in at 50.4 and 53.3 respectively.
Business activity in the country has slowed due to higher raw material costs, equipment maintenance, recent floods, and the latest outbreak of COVID-19.
Asia’s biggest economy had been recovering at a rapid pace but if this recent slowdown deepens, the outlook will fall significantly. The outlook for crude demand is shaky, and that is unlikely to change until global vaccination rates improve.
Investors also looked forward to more oil production from the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
Brent crude oil futures fell 1.05% at the time of writing this report and WTI crude oil futures fell 0.92%. According to reports, OPEC’s oil production rose to its highest level since April 2020 in July. Efforts to reduce production curbs will be further eased from August 1. Since then, Saudi Arabia has progressively ceased its voluntary supply cut.
There continues to be an increase in COVID-19 cases on a daily basis. A higher vaccination rate could however prevent the need for restrictive measures that caused fuel demand to plummet in 2020.
There will be no lockdown as the Delta variant of the virus fuels an outbreak of cases in mainly unvaccinated populations, but the situation is escalating, U.S. officials report.
The daily gasoline consumption of India, the third-biggest oil importer globally, exceeded pre-COVID-19 levels in July. While COVID-19 lockdowns were relaxed across the country, gas oil sales were low, indicating a sluggish industrial outlook.
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