US crude oil prices slid almost 7 percent on Monday, pressured by weak economic data from China, a US forecast for mild weather and growing doubts that Opec would act to reduce the swelling global supply glut. Chinese manufacturing contracted in January at the fastest pace since 2012, adding to worries about energy demand from the world's largest energy consumer.
"China is the last standing consumer of oil outside of the US The problem is that everyone is relying on them," said Carl Larry, director of business development at Frost & Sullivan in Houston. "As long as we keep in this scenario where China is the only real consumer to pick up the pace, we're going to see moves lower every time China has an issue with their economy."
A mild US winter has also dented demand for oil. Forecasts for warm temperatures through mid-February sent US New York Harbor heating oil futures down 5 percent. US West Texas Intermediate (WTI) slid to its biggest daily loss in five months, down 6.9 percent to an intraday low of $31.29 in volatile afternoon trading. That was still 19.5 percent higher than the more than 12-year low of $26.19 hit in mid-January.
By 1:23 pm EST (1823 GMT), US crude was down $2.17 or 6.5 percent at $31.45. Brent April crude futures were down $1.92, or 5.3 percent, at $34.07 a barrel after touching a low of $33.92. Oil prices also were pressured by a drop in US stock prices after weak manufacturing and flat consumer spending data. A senior Opec source told a Saudi Arabian newspaper it was too early to talk about an emergency meeting of the Organisation of the Petroleum Exporting Countries.
Oil prices soared last week, with Brent crude surging over 30 percent from the 12-year low touched earlier in the month, after Russian energy officials said they had received proposals from Opec leader Saudi Arabia on managing output and were ready to talk. In a sign investors were speculating on an oil rebound, data from the InterContinentalExchange showed net long positions in Brent rose last week by the most in four years.
But analysts have been raising doubts about a possible cut in Opec output. Goldman Sachs said it would be "highly unlikely" that Opec producers and Russia would cooperate to cut oil output. The influential US bank said it expects crude to trade between $20 and $40 a barrel until the second half of this year, low enough to force production to fall in line with demand.
Analysts noted that Iran plans to boost exports after years of sanctions and is unwilling to participate in cuts. Iraq, another Opec member, reported rising exports in January. "Seems like every time market participants say prices have bottomed, they have been wrong," said Dominick Chirichella, senior partner at Energy Management Institute in New York.
"There's nothing that says prices have bottomed - supply is still greater than demand by a lot, Chinese demand may be slackening, the global economy may be slackening and the likelihood of an Opec emergency meeting seems very low, as it did last week."
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