Oil sank to six-months lows on Monday as sluggish data out of the U.S. and China, and bets for weaker gasoline consumption after tearaway demand earlier in the summer, deepened losses in benchmark crude contracts.
Evidence of growing global oversupply and a stock market collapse in China, the world’s largest energy consumer, have weighed on oil for weeks, leading in July to U.S. crude futures’ largest monthly decline since the 2008 financial crisis.
With August trading in its first session, the rut accelerated as gasoline prices fell more than that of crude.
The supply glut aside, traders pinned the latest losses on sluggish U.S. and Chinese data.
U.S. consumer spending advanced at its slowest pace in four months in June as demand for automobiles softened. Growth in Chinese manufacturing activity, meanwhile, unexpectedly stalled in July as demand at home and abroad weakened.
“Economic weakness has set the tone,” said Matt Smith, director of commodity research at Clipperdata, a New York-based energy database.
“But the gasoline crack spread is also unravelling,” he said, referring to the difference between gasoline and U.S. crude prices, which sets the profit margin for refiners.
Brent, the global benchmark for crude, was down $2, or almost 4 percent, at $50.21 a barrel by 11:30 a.m. EDT (1530 GMT). Brent’s session bottom of $50.12 was the lowest since Jan. 30.
“The chart is looking anything but constructive,” said Fawad Razaqzada, technical analyst in London for forex.com, who expects Brent to test its January low of $45.20.
U.S. crude was down $1.15, or 2.4 percent, $45.97.
Gasoline was down more than 4 percent, narrowing its crack, or spread, with U.S. crude CL-RB1=R to below $26, the lowest in more than a week.
A Reuters survey last week showed oil output by the Organization of the Petroleum Exporting Countries (OPEC) reached the highest monthly level in recent history in July.
The survey showed Saudi Arabia and other key OPEC members keen in defending market over crude prices, which are down 12 percent this year, after last year’s 48 percent rout.
Hedge funds and other speculators have cut their bullish exposure to U.S. crude to the lowest in nearly five years, trade data showed on Friday, as local drillers continued to add rigs and pump at full throttle despite the global oil glut.
Large investors in Brent also cut their holdings last week by the most in percentage terms since September 2014.
