Oil prices fall on slowing global economic growth outlook
China’s August industrial profits dropped 8.8 percent from the same month last year, and January to August industry profits were down 1.9 percent.
“The growth problem endures. Asia isn’t about to bounce,” said Frederic Neumann, co-head of Asia Economics Research at HSBC in Hong Kong on Monday in a note to clients.
The International Monetary Fund (IMF) is likely to revise downwards its global economic growth outlook due to weakness in emerging markets.
Brent crude futures were at $48.13 per barrel at 0133 EDT, down 47 cents. U.S. crude was 44 cents lower at $45.26 a barrel. Crude futures are now down more than 10 percent since the end of August.
Monday’s price falls came despite an ongoing reduction in U.S. drilling, which has been on the decline for four straight weeks, a sign continued weak prices were causing oil and gas producers to reduce drilling plans.
Yet analysts said U.S. oil output was holding up despite the lower drilling.
“A rapid draw-down of the observed backlog of uncompleted wells could lead to higher production later this year and in 2016,” Goldman Sachs said.
Analysts said U.S. output data would likely be the main driver this week for oil prices, especially as Chinese trading slows ahead of its seven-day National Day holiday that starts on Oct. 1.
The U.S. Energy Information Administration is due to release its monthly petroleum supply report on Wednesday.
“We expect there to be laser-focus on U.S. production figures … Signs that U.S. production rolled (fell) could provide a boost to both WTI and Brent flat prices,” Morgan Stanley said.
Jefferies bank said that oversupply in oil markets had halved since the second quarter to around 1 million barrels per day, and that the falling prices since June 2014 were impacting production.
“The price signal is working. U.S. production is past its inflection and declines are accelerating … (and) non-OPEC supply outside the U.S. is also beginning to show the effects of lower investment that arises from lower oil prices,” Jefferies said.
On the demand side, Barclays said that India “remains one of the bright spots” with oil demand up 7 percent between January and August this year compared to the same period in 2014.