The assistance from supply cutbacks from OPEC+ that go into effect this month was offset by bad economic statistics from China and predictions of another U.S. interest rate rise, resulting in an almost $2 per barrel decline in oil prices on Monday.
By 1:28 p.m. EDT (1728 GMT), Brent crude had decreased $1.88, or 2.3%, to $78.45 per barrel. WTI crude for the United States fell $1.90, or 2.5%, to trade at $74.88.
According to official statistics released on Sunday, China's manufacturing activity unexpectedly decreased in April. This is the first decline in the industrial purchasing managers' index since December.
The majority of the real-time news from the industrial sector was a letdown, according to Third Bridge analyst Peter McNally. “The market is highly dependent on what happens to China.”
According to him, China is anticipated to be the main driver of this year's increase in oil consumption.
When the US Federal Reserve meets on May 1-2, it is anticipated that interest rates would rise by an additional 25 basis points. Oil became more costly for holders of foreign currencies when the U.S. dollar increased versus a basket of currencies.
“We continue to be at the mercy of sentiment surrounding a Chinese recovery or lack thereof, while the backdrop in the U.S. of ongoing monetary tightening leaves us in the 'bad is good' realm when it comes to economic data or newsflow,” said Kpler analyst Matt Smith.
Oil prices have been affected by banking concerns in recent weeks, and First Republic Bank, the third significant American institution to collapse in two months, was seized over the weekend by American authorities in preparation for a transaction in which JPMorgan would acquire the majority of its assets.
From May, members of the Organization of the Petroleum Exporting Countries and its allies, including Russia, together known as OPEC+, would voluntarily reduce their daily production by around 1.16 million barrels.
The fact that U.S. manufacturing activity managed to bounce from a three-year low in April as new orders somewhat improved and employment increased helped to sustain oil prices.
“Crude prices are paring losses on optimism that the economy can strengthen now that banking drama is behind us and on signs that factory activity is improving,” said OANDA analyst Edward Moya.
