The benchmark Brent crude fell 2.2% on Monday to $51.08 a barrel on London’s ICE Futures exchange as oil prices slid to new lows amid “bearish” supply and demand data are causing oil prices to slide to fresh lows.
Demand from China — the world’s second-biggest oil consumer — may be slowing as the country reported Monday that manufacturing activity fell to a two-year low. On the other side of the ledger, the supply glut is continuing with a rise in U.S. oil drilling rigs, as well as expanded production worldwide.
“The prospects of a second half-year price rebound have evaporated and there is a clear and present danger of prices revisiting the previous lows of the year,” David Hufton of oil brokerage PVM told The Wall Street Journal.
With Monday’s drop, Brent crude is trading near its lowest level since January. On the New York Mercantile Exchange, West Texas Intermediate futures were trading near levels not seen since March, down 1.6% at $46.38 a barrel.
In China, the Caixin manufacturing purchasing managers index fell to 47.8 in July, from 49.4 in June, its lowest level since 2013. A level under 50 indicates a contraction in activity.
“July has been an awful month for commodities and we leave it behind with much more concern about the condition of the Chinese economy,” Hufton said.
Oil entered a bear market last month with WTI shedding 21% of its value and Brent losing 18%. Meanwhile, the oil rig count rose by five rigs to 664, according to the oilfield services firm Baker Hughes.
The data suggest U.S. producers “are coming to the point where they start considering growth, at least at the margin,” Deutsche Bank analysts wrote in a research note.
The supply glut is worldwide, as suppliers fight fiercely for market share. Output grew by one million barrels a day in 2014 and 101 companies that Barclays tracks plan to accelerate growth to 1.4 million barrels a day this year and maintain that level into 2016.