Oil prices closed lower on Monday as demand worries were compounded by “disappointing economic numbers flowing from China along with a surprise slowdown in European manufacturing.” Brent crude futures for November fell 59 cents, or 0.8%, to $73.90 a barrel, while U.S. crude futures for November dropped 63 cents, or 0.9%, to $70.37.
Euro zone business activity contracted unexpectedly, while U.S. business activity remained steady, though average prices charged for goods and services rose “at the fastest pace in six months,” potentially signaling rising inflation. China, meanwhile, continues to battle deflationary pressures despite policy efforts to spur domestic spending. Geopolitical tensions, including Israel’s airstrikes on Hezbollah targets, added supply concerns. Dennis Kissler, senior vice president at BOK Financial, noted that “more attacks from Israel on Lebanon spawn fear that Iran will become more involved, which raises the probability of oil exports being at risk.” Additionally, a tropical disturbance near the Gulf of Mexico led Shell and Chevron to shut down or evacuate personnel from oil platforms as a precaution.
U.S. crude oil stockpiles were expected to have dropped by about 1.2 million barrels last week. Both oil benchmarks rose over 4% last week, buoyed by the U.S. Federal Reserve’s decision to cut interest rates by 50 basis points. Chicago Fed President Austan Goolsbee said he expects “many more rate cuts over the next year” as the central bank aims for a “soft landing” for the economy.