Oil Prices Dip on Weaker China Data

Oil Prices Dip on Weaker China DataOil Prices Dip on Weaker China Data

Oil fell on Monday as weaker-than-expected Chinese economic data weighed on markets, adding to concerns that declining global demand would exacerbate a surplus of crude.

Markets are also waiting to see whether the US central bank raises interest rates for the first time in nearly a decade later this week. Should rates rise, analysts expect oil to fall, as a stronger dollar would undermine demand from importing countries, Reuters reported.

Oil prices have dropped almost 60% since June 2014 on the largest global surplus in modern times and concerns about a slowing Chinese economy.

Growth in China's investment and factory output missed forecasts in August. A recent run of weak data from the world's second-largest economy has raised the chances that third-quarter growth may dip below 7% for the first time since the financial crisis.

"There has been a very broad-based reaction to China across commodities, industrial metals and equities," SEB chief commodities analyst Bjarne Schieldrop said.

Front-month Brent crude futures were down 61 cents at $47.53 a barrel. US crude futures were down 20 cents at $44.43 a barrel.

Barclays expects the spread between US crude and Brent, which is at its narrowest in three months, to contract further, noting "relative performance versus Brent continues to improve."

The Organization of the Petroleum Exporting Countries on Monday lowered its non-OPEC oil supply growth forecast, sticking to its view that its strategy of letting prices fall will curb supply from the United States and other rival producers.

The International Energy Agency said last week that production cuts would lead to a rebalancing of the oil market by next year. The US oil rig count fell by 10 to 652 last week, the second straight weekly drop.

A fall in US production in response to lower prices could provide price support, analysts say. Yet several banks said the immediate outlook remained weak, with Goldman Sachs and Frankfurt-based Commerzbank cutting their oil price forecasts last week.