Crude oil prices drop after pre-weekend surge

Crude prices fell on Monday following a pre-weekend surge and in the wake of weak Chinese economic data, and as markets assessed the impact of a European Union embargo on Iranian oil.
Brent North Sea crude for delivery in August shed $1.33 to stand at $96.47 a barrel in midday London deals.
New York’s main contract, light sweet crude for August, dropped $1.10 to $83.86 a barrel.
US prices had rocketed more than $7.0 a barrel on Friday as buyers seized on eurozone leaders’ agreement on key crisis measures as a signal that oil demand could rise. Brent prices had also soared by about $6.50 a barrel.
Monday’s fall in crude was unsurprising after Friday’s surge, said Victor Shum, an analyst at Purvin and Gertz energy consultants.
“That’s not surprising after the gain last Friday,” he told AFP.
“The pullback is also supported by some of the latest data out of China showing the purchasing managers index falling in June,” added the Singapore-based analyst.
Weekend data showed China’s purchasing managers’ index (PMI) slumping last month despite government efforts to arrest a slowdown in the world’s largest energy consumer.
The official PMI slipped to 50.2 in June from 50.4 in May, industry group the China Federation of Logistics and Purchasing said in a statement issued Sunday.
On Monday, British bank HSBC released its China PMI, which gave a gloomier picture than the official data. It showed the country’s manufacturing activity contracting for the eighth consecutive month in June. The bank’s index fell to 48.2 in June from 48.4 in May, according to an HSBC statement.
A PMI reading above 50 indicates expansion, while a reading below 50 points to contraction. HSBC’s preliminary reading for June was 48.1.
A European Union embargo on Iranian oil began on Sunday, provoking anger in Tehran which said the measure would hurt talks with world powers over its sensitive nuclear activities.
Oil market observer bodies and analysts said the embargo, coupled with US financial sanctions ramped up on Thursday, were gutting Iran’s vital oil exports, which account for half of government revenues.
The EU embargo was the latest — and most punishing — of a raft of international sanctions designed to pressure Iran to curb its nuclear programme.
Most of the West fears that the Islamic republic is seeking to get to the cusp of being able to make nuclear weapons, despite Tehran’s repeated denials.
“This weekend marked the official beginning of the EU’s embargo on Iranian crude exports, which will not only see a full halt to purchases of Iranian barrels by buyers in the EU, but will also make acquiring shipping insurance for vessels carrying Iranian supplies considerably more difficult,” JBC Energy research group said in a note to clients on Monday.