Oil prices fell more than 1% on Monday as fears that Chinese oil crude consumption is slowing and that OPEC may increase global supply following a meeting this week.
Brent crude settled at $63.69 a barrel, falling 73 cents, or 1.1%, and U.S. West Texas Intermediate (WTI) crude settled at $60.64 a barrel, losing 86 cents, or 1.4%.
China’s factory activity growth slipped to a nine-month low in February, sounding alarms over Chinese crude buying and pressuring oil prices.
“There’s some talk that their strategic reserves are filled up, and so some people are betting against the Chinese continuing to drive oil prices,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Investors were also concerned that the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, would soon increase oil output.
“The worry is that that’s going to end up adding as much as 1.5 million barrels to the market,” said Bob Yawger, director of energy futures at Mizuho. “They have to construct some kind of story to bring those barrels back.”
OPEC oil output fell in February as a voluntary cut by Saudi Arabia added to agreed reductions under a pact with allies, ending a run of seven consecutive monthly increases.
The group meets on Thursday and could discuss allowing as much as 1.5 million barrels per day of crude back into the market.
ING analysts said OPEC+ needs to avoid surprising traders by releasing too much supply.
“There is a large amount of speculative money in oil at the moment, so they will want to avoid any action that will see (those investors) running for the exit,” the analysts said.
A stronger U.S. dollar, which typically moves inversely with oil, also weighed on oil.
Rising COVID-19 vaccinations stirring up economic activity along with a $1.9 trillion coronavirus-related relief package passed by the U.S. House of Representatives on Saturday kept prices from sinking lower.
Oil prices rose earlier in the session on hopes tied to the proposed U.S. stimulus package would pay for vaccines and medical supplies, and send a new round of emergency financial aid to households and small businesses, which will have a direct impact on energy demand.
The approval of Johnson & Johnson’s COVID-19 shot also buoyed the economic outlook.