LONDON: Oil prices hovered near multi-month lows on Monday as lingering worries about demand weakening on the back of a darkened economic outlook outweighed some positive economic data from China and the United States.
Erasing earlier gains, Brent crude futures were down 55 cents, or 0.6 percent, at $94.37 a barrel. US West Texas Intermediate crude was at $88.25 a barrel, down 76 cents, or 0.9 percent.
Front-month Brent prices last week hit the lowest since February, tumbling 13.7 percent and posting their largest weekly drop since April 2020, while WTI lost 9.7 percent, as concerns about a recession hitting oil demand weighed on prices.
"Last week’s price action left no doubt that recession-driven demand concerns have the upper hand over supply fears. One could even go as far as saying the war premium has evaporated," PVM analyst Stephen Brennock said.
Both contracts recouped some losses on Friday after jobs growth in the United States, the world's top oil consumer, unexpectedly accelerated in July. On Sunday, China also surprised markets with faster-than-expected growth in exports.
China, the world's top crude importer, brought in 8.79 million barrels per day (bpd) of crude in July, up from a four-year low in June, but still 9.5 percent less than a year earlier, customs data showed.
In Europe, Russian crude and oil products exports continued to flow ahead of an impending embargo from the European Union that will take effect on Dec. 5. Last week, the Bank of England warned of a protracted recession in Britain.
Gasoline demand in the United States continues to weaken despite falling prices at the pump, and stockpiles are rising. In terms of U.S. production, energy firms last week cut the number of oil rigs by the most since September in the first drop in 10 weeks.
The U.S. clean energy sector received a boost after the Senate on Sunday passed a sweeping $430 billion bill. Meanwhile WTI crude oil made a small recovery in Asia after hitting a 6-month low of US$ 87.01 on Friday as the dollar found support across the board.
Data from energy technology company Baker Hughes showed a small drop of oil rigs operating in the US last week. It fell by 7 rigs to 598 compared to 387 oil rigs in operation a year ago.
Asian markets have started the week fairly muted as the fallout from Friday’s US non-farm payrolls data continues to be digested. WTI has fallen in price at the same time that backwardation has moved lower. Backwardation occurs when the contract closest to settlement is more expensive than the contract that is settling after that first one.
It highlights a willingness by the market to pay more to have immediate delivery, rather than having to wait. With backwardation falling back to levels seen before the Russian invasion of Ukraine, it may allow for prices to continue lower.