By Ambar Warrick
Investing.com-- Oil prices sank in early trade on Monday, extending losses from last week as signs of weak Chinese consumption raised concerns over slowing demand for crude.
As of 2004 ET (0004 GMT), Crude Oil WTI Futures sank 0.9% to $88.19 a barrel, while Brent Oil Futures dropped 0.6% to $94.06. Both contracts were trading at their lowest levels since late January.
Strength in the U.S. dollar - following a stellar payrolls reading last week - also weighed on crude prices on Monday. Market expectations for a sharp interest rate hike by the Federal Reserve are growing in the wake of the data.
Crude markets were dealt a fresh blow by data from China showing that imports grew at a weaker-than-expected rate in July- furthering a trend of slowing demand in one of the world’s largest oil importers.
While imports did grow at a faster pace than last month, they were the second-lowest reading seen this year. Still, China logged a record-high trade surplus as exports remained robust.
Economic activity in China has been severely dented by COVID-19 lockdowns this year, with an official reading last week showing that the manufacturing sector contracted in July. The data, coupled with dismal manufacturing prints from across the globe, saw oil prices mark their worst week since the March 2020 COVID crash.
Stronger-than-expected U.S. payrolls data on Friday also saw investors expecting a steep interest rate hike by the U.S. Federal Reserve next month- a move that is negative for oil markets.
But a further drop in oil prices could ease inflationary pressures- given that rising fuel rates have been the biggest contributor to inflation this year.
Focus now turns to a swathe of key inflation data from the United States, China, and the Eurozone- due later this week. Higher-than-expected readings could fuel more concerns over increased monetary tightening by the Fed, dragging down oil prices.