Oil Futures Settle Sharply Lower As Data Fuels Demand Concerns

Oil futures ended sharply lower on Thursday amid rising concerns about outlook for energy demand due to worries about a recession and on reports showing a surge in Covid-19 cases in China.

Oil prices fell on worries that aggressive rate hikes by major central banks may lead to a global economic slowdown and dent fuel demand.

Disappointing manufacturing data from China, Japan, the U.K., and the euro area weighed substantially on oil prices.

The dollar’s sharp uptick on rate hike concerns hurt oil prices. The dollar index rose to a fresh 20-year high at $109.98 before paring some gains.

Investors are betting that the U.S. Federal Reserve and the ECB will both raise their key borrowing costs by 75 basis points when they meet later this month.

West Texas Intermediate Crude oil futures for September ended lower by $2.94 or about 3.3% at $86.61 a barrel, after falling to a low of $85.98 a barrel in the session.

Brent crude futures were down $3.63 or 3.8% at $92.01 a barrel a little while ago.

According to a Reuters report, Southern Chinese tech hub Shenzhen tightened COVID-19 curbs as cases kept increasing. Large events and indoor entertainment were suspended for three days in the city’s most populous district, Baoan.

The euro area manufacturing activity shrank for the second straight month in August, adding to fears of recession in the currency bloc, final survey data from S&P Global showed.

The final factory Purchasing Managers’ Index declined to a 26-month low of 49.6 in August from 49.8 in the previous month. The flash score was 49.7. The reading was below the neutral 50.0 mark for the second straight month.

Final survey results from S&P Global showed the UK manufacturing sector registered its sharpest contraction since May 2020 on steep decreases in production and order intake. The Chartered Institute of Procurement & Supply factory Purchasing Managers’ Index fell to 47.3 in August from 52.1 in July. But the score was above the flash estimate of 46.0.

The manufacturing sector in China fell into contraction territory in August, the latest survey from Caixin showed on Thursday with a manufacturing PMI score of 49.5.

That’s down from 50.4 in July, and it moves beneath the boom-or-bust line of 50 that separates expansion from contraction.

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