Concerns over a possible recession increased on Monday when surveys from the US, Europe, and Asia revealed that factories failed to gain momentum in July. Production was slowed down by China’s rigorous COVID-19 regulations and waning worldwide demand. The price declines also occur while market investors wait for the conclusion of a meeting on Wednesday between OPEC and its partners, including Russia, collectively known as OPEC+, to decide on September output.
“The upward momentums of oil prices has been gradually fading … Once the supply and demand situation shows any sign of further deterioration, oil is likely to lead the decline among commodities,” analysts from Haitong Futures said.
In the meantime, the US imposed sanctions on Chinese and other companies on Monday in an effort to put more pressure on Tehran to curtail its nuclear programme. The US claimed that these companies assisted in the sale of Iranian oil and petrochemical products to East Asia worth tens of millions of dollars. The likelihood that Nancy Pelosi, the Speaker of the US House, will travel to Taiwan despite Beijing’s warnings against it also casts a shadow over the market. Since a prominent American official hasn’t visited the island in over 25 years, the visit could increase tensions between the United States and China.
“Crude prices tumbled after a wealth of factory activity data suggested the world is headed towards a giant global economic contraction, and on expectations for more oil output following a very good earnings season for oil companies,” said Edward Moya, senior market analyst from OANDA, in a note.
Two out of eight OPEC+ sources surveyed by Reuters indicated that the meeting on August 3 would discuss a minor increase for September. The rest of the output is probably going to remain constant. Saudi Arabia will press OPEC+ to expand oil production at the summit, according to a Fox Business news correspondent.