U.S. crude oil drops over 4% amid China’s weak economy

U.S. crude oil futures experienced a significant decline of over 4% on Tuesday, marking the lowest closing price since December and erasing all gains made in 2024. This downturn is attributed to a combination of factors, including excess supply, reduced demand, and negative market fundamentals. The West Texas Intermediate October contract closed at $70.34 per barrel, while the Brent November contract fell to $73.75 per barrel. Gasoline and natural gas prices also saw fluctuations, with gasoline dropping more than 5% year-to-date. The decline in oil prices coincided with disappointing manufacturing data from both China and the U.S. China's manufacturing activity fell to a six-month low in August, raising concerns about demand from the world's largest crude oil importer. Similarly, U.S. manufacturing growth was slower than anticipated, further contributing to bearish market sentiment. These developments have led to increased pressure on oil prices, as traders react to the potential for reduced consumption. Additionally, the prospect of increased oil output from OPEC+ has compounded the situation. OPEC+ delegates have indicated plans to boost production in October, despite the ongoing production disruptions in Libya due to political disputes. Reports suggest that Libya's rival governments may be nearing a resolution, which could restore oil output and further impact global oil supply. Experts suggest that OPEC+ should consider delaying production increases until December, given the current slowdown in demand, particularly from China. The combination of these factors has created a challenging environment for crude oil prices, leading to significant market volatility.