Oil prices fell Monday as a slowdown in Chinese refining raised concerns about demand in the world’s second-biggest consumer, while an increase in U.S. drilling capacity could deepen a global supply glut.
National Bureau of Statistics (NBS) data showed that Chinese refineries processed 10.71 million barrels per day (bpd) in July, down around 500,000 bpd from June and the lowest rate since September 2016.
According to analysts, the drop was steeper than expected, exacerbating concerns that a glut of refined fuel products could weaken Chinese demand for oil, Reuters reports.
Global benchmark Brent crude futures LCOc1 were down 27 cents from Friday’s close at $51.83 a barrel at 0846 GMT. They touched a low of $51.66 earlier in the session.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at $48.64 a barrel, down 18 cents.
Oil investors were also cautious after U.S. drilling rig data published by Baker Hughes on Friday showed explorers increased oil drilling capacity for the second time in three weeks, extending a 15-month recovery in drilling.
The rising rig count hints at sustained output growth just as the world’s major oil producers, excluding the United States, try to stem oversupply by trimming production.
Oversupply has been exacerbated by rising production in Libya, which is one of the OPEC members exempt from production cuts and has been trying to regain its pre-war oil production levels.
“The recovery in Libyan production has been the single largest factor driving global supply growth in the last few months,” said oil analysts at Panmure Gordon.
Libya’s National Oil Corporation said on Monday it was investigating security violations at its biggest oilfield, the Sharara field.
Sharara has been producing around 270,000 bpd but the NOC did not specify whether the security violations had any impact on output.
