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Energy logged Tuesday’s biggest stock sector decline, as U.S. oil futures slipped below $81/bbl in thin trading following another round of weak economic data out of China, which prompted surprise interest rate cuts by the People’s Bank of China.
The latest data showed China’s industrial production rose 3.7% in July compared to a year ago, below the 4.4% increase analysts had expected, and real estate investment in July fell by 8.5% from a year ago, a greater decline than in June.
Oil-specific data was more encouraging, as refiners processed 14.93M bbl/day of crude oil in July, up 31% Y/Y and topping the 14.89M bbl/day processed in June.
Front-month Nymex crude (CL1:COM) for September delivery settled -1.8% to $80.99/bbl, while October Brent crude (CO1:COM) closed -1.5% to $84.89/bbl, the lowest for both benchmarks since August 2.
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Refiners fell broadly as Bank of America downgraded the group: PBF Energy (PBF) -5.2%, Valero (VLO) -3.9%, Marathon Petroleum (MPC) -3.5%, HF Sinclair (DINO) -3%, Phillips 66 (PSX) -1.1%.
Oil’s weakening sentiment comes even as physical markets continue to show signs of strength, as crude inventories at the Cushing, Oklahoma, hub are expected to drop to their lowest level since April, while Asian refineries continue to ramp up imports.
Supplies have become increasingly tight since late June as Saudi Arabia and Russia cut production, helping to drain stockpiles, and consumption has been surprisingly strong, at least in the U.S, where the Energy Information Administration reported record levels of usage seasonally.
But crude oil’s rally has fizzled in recent days amid growing concerns that Chinese demand has peaked for the year.
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