West Texas Intermediate plunged as much as 5.7% to fall below US$87 a barrel.
LONDON (Aug 15): Oil fell as softer economic data from China and a potential breakthrough in negotiations with Iran eased pressure on crude markets.
West Texas Intermediate plunged as much as 5.7% to fall below US$87 a barrel, the lowest in more than six months. Oil retreated after China announced a surprise cut in key interest rates on the back of weak economic data. Meanwhile, Iran signalled a nuclear deal agreement could be reached in the next few days, raising the prospect of Iranian crude returning to the global market.
"Most are increasing the probability of an Iranian deal," said Rebecca Babin, a senior energy trader at CIBC Private Wealth Management. "I see US$80 as significant support and would expect buyers start to get interested at those prices," she added.
Foreign Minister Hossein Amirabdollahian said in a briefing that the country would inform the European Union on Monday evening of its position regarding a final draft text for a finalised nuclear deal, striking a more conciliatory tone than in recent months. A spokesperson for the Iranian foreign ministry said there could be a basis for a signed agreement "in the very near future."
Crude has ticked lower over the past couple of months on concerns about an economic slowdown, shedding all the gains immediately following Russia's invasion of Ukraine. Money managers have cut their bullish bets on WTI to the lowest in over two years, according to the Commodity Futures Trading Commission.
Providing more slowdown fodder, data released on Monday showed China's apparent oil demand last month was about 10% lower year-on-year, with the economy battered by virus lockdowns and property woes.
"We're really seeing where China's economy is at and it's a lot less rosy than people had hoped, consumption is going to be lower than anticipated, certainly for oil," Sucden Financial's Head of Research Geordie Wilkes said by phone.
China's economic recovery unexpectedly weakened in July, as fresh Covid-19 outbreaks impacted consumer and business spending. Industrial output rose 3.8% from a year ago, lower than June's 3.9% and missing economists' forecast of a 4.3% increase. Oil refining also fell as plants shut for maintenance.
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