Crude oil prices fell below $107 a barrel on Thursday after weak Chinese economic indicators lowered fuel demand prospects in the world’s second-largest oil consumer, and after U.S. crude oil production reached its highest level in over two decades.
The price of a barrel of crude oil on the London market fell by 51 cents to $106.68, while on the U.S. market it dropped by 84 cents to $104.55.
Data showed that Chinese manufacturing activity hit an 11-month low in July and that its labor market weakened, raising concerns that the country’s demand will grow more slowly than expected.
At the same time, crude oil production in the leading consumer, the U.S., rose to 7.56 million barrels per day, the highest level since 1990, according to U.S. government data. Confirmation of a decline in U.S. oil inventories failed to support prices.
“China remains a key driver of global oil demand, a dynamic that has significantly lagged behind supply growth this year. Weaker demand from China will thus cause additional oversupply,” said Carsten Fritsch from Commerzbank. “Financial investors clearly see this as an opportunity to realize profits, so oil prices are likely to remain under pressure,” he added.
U.S. crude oil inventories fell for the fourth consecutive week last week, according to U.S. government data released on Wednesday. On the other hand, gasoline and distillate inventories unexpectedly fell.
The Organization of the Petroleum Exporting Countries (OPEC) meanwhile announced on its website that the price of its reference basket of oil was $105.44 on Wednesday, which means it was 51 cents lower than the day before.
