The market extended losses from the previous session on demand concerns from China, the world’s largest importer of crude. The market does not take the risk of escalating Middle East conflict seriously.
Brent crude futures were down 40 cents, or 0.5%, to $79.38 a barrel by 0640 GMT. WTI futures were down 43 cents, or 0.6%, to $75.38 a barrel.
A string of disappointing economic news from China has shaken markets recently. China’s manufacturing activity likely contracted for a third month in July.
China’s growth forecast was cut to 4.8% from 5% after the country’s second-quarter growth missed analysts’ estimates, and economic activity weakened further in July.
The Organization of the Petroleum Exporting Countries and its allies believe the market is more likely to be down in the short term. This trend is weighed down by the potential restoration of production by some OPEC+ members in Q4, along with sluggish domestic demand from China.
Customs tensions with Europe and the US will also weigh on Chinese crude demand.
The market is eyeing the upcoming meeting of China’s top decision-making body, the Politburo, which is expected to take place this week and could provide further economic policy support.
However, expectations are limited after the Third Plenum, a key policy meeting in mid-July, largely reiterated current economic policy goals and failed to boost market sentiment.
Oil fell 2% in the previous trading session after Israel said its response to a rocket attack by Hezbollah on the Israeli-occupied Golan Heights on Saturday would be calculated to avoid dragging the Middle East into full-scale war.
This was reinforced by US diplomatic efforts to limit Israel’s response and prevent it from attacking the Lebanese capital Beirut or any major civilian infrastructure in retaliation.
In Venezuela, the opposition says it won 73% of the vote, despite the national electoral authority declaring incumbent Nicolas Maduro the winner and giving him a third term.
Maduro’s victory in the latest Venezuelan elections is a headwind for global supplies, as it could lead to tighter US sanctions and reduce Venezuela’s exports by 100,000-120,000 barrels per day.
The results are being viewed with skepticism, with calls for a full count of the votes.
