Oil futures fell Monday, feeling pressure after a weak reading on China factory activity and a widening of COVID-19 curbs by the country.
Previously beaten-down natural-gas futures, meanwhile, rallied by more than 9%.
Price action
-
West Texas Intermediate crude for December delivery
CL.1,
-2.61% CLZ22,
-2.61%
fell $1.52, or 1.7%, to $83.38 a barrel on the New York Mercantile Exchange. -
December Brent crude
BRNZ22,
-1.23% ,
the global benchmark, was down $1.19, or 1.2%, at $95.77 a barrel on ICE Futures Europe on the contract’s expiration day. January Brent
BRN00,
-2.14% BRNF23,
-2.14% ,
the most actively traded contract, declined $1.27, or 1.3%, to $93.77 a barrel. -
Back on Nymex, December natural gas
NGZ22,
+10.49%
surged 9.3% to $6.214 per million British thermal units, cutting its October loss to 12%, according to FactSet. -
November gasoline
RBX22,
-3.89%
fell 3% to $2.8188 a gallon, while November heating oil
HOX22,
-6.69%
was down 0.9% at $4.511 a gallon, with both contracts due to expire at the end of the session.
Market drivers
Oil was under pressure after China’s official gauges for measuring factory, construction and service activities all fell into contraction territory in October, underlining fears about economic weakness — and crude demand — by the world’s second-largest economy.
The oil benchmarks “eased their way down at the start of this week, as concerns mount over China’s road to economic recovery following a series of COVID-induced lockdowns this year,” said Harry Altham, energy analyst, EMEA & Asia for StoneX Group, in market commentary.
China’s official manufacturing purchasing managers index fell to 49.2 in October, compared with 50.1 in September, the National Bureau of Statistics said Monday. Economists polled by The Wall Street Journal had, on average, looked for a reading of 49.7. A reading of less than 50 indicates a contraction in activity.
“Renewed restrictions on movement, such as the one seen in the city of Zhengzhou, plus the impact of the Communist Party Congress in Beijing, is thought to have dampened the numbers beyond initial expectations,” said Altham.
China’s official nonmanufacturing PMI, which covers service and construction activity, fell to 48.7 in October from 50.6 in September, weighed down by the slumping service sector and slower growth in construction activity, according to the statistics bureau.
Meanwhile, news reports said Chinese cities were expanding COVID-19 lockdowns in an effort to control the spread of the virus. Lockdowns have been blamed for curtailing crude imports by China and weighing on economic activity.
The Chinese PMI reading coming in below expectations revived “fears of both slower growth and oil demand” and limited risk appetite, said Pierre Veyret, technical analyst at ActivTrades, in emailed comments.
In related news, the Organization of the Petroleum Exporting Countries released its 2022 World Oil Outlook report. The long-term view on the oil market said the world economy is expected to more than double in size, and the global population rise by 1.6 billion between now and the year 2045.
The report said oil is expected to retain the largest share in the energy mix, accounting for almost a 29% share in 2045 and that oil demand is projected to increase to around 110 million barrels a day in 2045, from almost 97 million barrels a day in 2021.
Natural-gas rally
Natural-gas futures remained volatile, building on last week’s 3.9% rebound.
The Monday bounce is a continuation of recent developments around renewed liquefied natural-gas flows, with U.S. prices starting to recover after more than halving over the past two months, said Ole Hansen, head of commodity strategy at Saxo Bank.
A stronger-than-expected build in U.S. inventories has started to slow as flows to LNG exporting plants, which had been curtailed in part due to a fire at a major Texas facility, have picked up the pace, tightening domestic supplies, he said.
Commodities Corner: Why natural-gas prices posted a 6-session decline of 26%
Also see: Why have gasoline prices in the Northeast jumped in the past week?
Barbara Kollmeyer contributed to this article.
