Weak China PMI & OPEC Output Plans Weigh On Prices

Oil prices finished August down on the month as demand/supply fundamentals came back into focus. They fell sharply on Friday as some OPEC delegates reiterated that the group will stick to its plan to reduce output cuts from October and have continued falling in trading today with the drop in China’s manufacturing PMI also weighing. Higher yields drove a stronger US dollar with the USD index up 0.2%, which also pressured on crude.

• WTI fell 3% to $73.65/bbl on Friday to be down 4.2% in August. The benchmark fell to a low of $73.36, the lowest in a week and below initial support at $73.82. The bear trigger is at $70.88. Before the OPEC news it had been trading above $76 and had reached $76.59. It has continued to fall at the start of trading today with it currently around $72.97. The US is closed today which may impact volumes.
• Brent is down 2.3% to $77.05 after a low of $76.70 and has started today around $76.30. The benchmark fell 4% in August. It remains above key support at $74.62. Key resistance is at $81.46.
• OPEC delegates said that the plan to gradually reduce output cuts from next month will go ahead as planned with an increase of 180kbd despite softer prices. There may be disagreements between countries though on the way forward at the next meeting. Libya’s output is now down 68% following a dispute between the country’s two governments. If unresolved this could encourage OPEC’s planned pickup in output.
• Not only did China’s August manufacturing PMI remain in contractionary territory, it signalled that activity fell at a faster pace. China’s demand for crude has worried the market for some time.
• Ukraine continued to target Russian energy infrastructure with a drone strike on a refinery near Moscow but authorities said that its operation are unaffected.