London — Oil prices fell on Wednesday, pressured by lacklustre economic activity by leading importer China, though a first monthly gain since September remained in sight as flaring tensions in the Middle East heightened supply concerns.
Brent crude futures for March, which expire later on Wednesday, fell 87c, or about 1.1%, to $82 a barrel by 11.03am GMT. The more actively traded April contract fell 80c, or about 1%, to $81.70.
West Texas Intermediate lost 82c, or roughly 1.1%, to $77 a barrel.
Manufacturing activity in China, the world’s second-largest economy, contracted for a fourth straight month in January, an official survey showed on Wednesday.
The latest sign of the country’s broader economy struggles to regain momentum came days after a court ordered the liquidation of property developer China Evergrande. The real estate sector accounts for a quarter of China’s GDP.
Major forecasters, including the Opec, see oil demand growth in 2024 driven primarily by Chinese consumption.
“The factory data confirms our view that China, at least for now, is an impediment to global oil demand growth,” said Tamas Varga of oil broker PVM.
The Israel-Hamas war, meanwhile, has expanded to a naval conflict in the Red Sea between the US and Iran-aligned Houthi militants. While that has disrupted oil and natural gas tanker shipping, which is driving up delivery costs and starting to affect oil supplies, a Reuters survey suggests that record production in the West and slow economic growth will keep a lid on prices and limit any geopolitical risk premium.
“The main issue with turning outright bullish on crude oil here is the technical picture remains bearish and is yet to catch up with recent events,” including a deadly drone attack on US troops near the Jordan-Syria border last week, said IG market analyst Tony Sycamore.
Yemen’s Iran-aligned Houthi group on Wednesday said it would continue with attacks on US and British warships in the Red Sea in what it called acts of self defence, stoking fears of long-term disruption to global trade.
Israel’s kept up its offensive in Gaza, though Palestinian militant group Hamas said it was studying a new proposal for a ceasefire and release of hostages in Gaza.