Oil futures: Brent retreats 3.5% on weak China data, Saudi says can hike output

Quantum Commodity Intelligence - Crude oil futures Monday extended losses into a second session after weak data from China, while Saudi Aramco said it could step up output if needed, although prices bounced off the lows in late-afternoon European trading. 

Front-month October ICE Brent futures were trading at $94.83/barrel (1725 GMT), compared to the day's low of $92.78/b and Friday's settle of $98.15/b.

At the same time, September NYMEX WTI was trading $89.07/b, versus Friday's settle of $92.09/b, while the Oct22 contract was trading at $88.47/b, versus the previous close of $91.46/b.

Prices retreated as China's consumer and factory data missed expectations in July. Retail sales grew by 2.7% in July from a year ago, the National Bureau of Statistics said Monday, below forecasts of around 5% and down from growth of 3.1% in June.

"Real estate property construction, home sales and mortgages are just part of the weaknesses we have seen in the Chinese economy. Export demand could also weaken in the coming months," said Iris Pang, ING's Chief Economist for China, adding this would likely derail job growth in China.

Prices also dropped as Saudi Arabia said it is ready to increase oil production to 12 million bpd when the government asks for it, according to its CEO Amin Nasser. 

"We are confident of our ability to ramp up to 12 million bpd any time there is a need or a call from the government or from the ministry of energy to increase our production," the Aramco boss told reporters.

Previous reports suggested that Aramco was close to operational capacity and would struggle to produce above 11 million bpd for over a few months.

Saudi Arabia boosted output by 220,000 bpd, pumping around 10.77 million bpd in July, its highest in more than two years and short of its July OPEC+ quota of 10.83 million bpd.

However, the world's largest exporter is seen as unlikely to operate unilaterally outside of the OPEC+ group, scheduled to add around 30,000 bpd in September. 

Adding to the downturn, Iran is due to decide later Monday if it will accept a deal to revive the JCPOA deal. 

Shell and Chevron both said late Thursday that they had halted oil production at several platforms in the Gulf of Mexico following a minor leak that knocked two pipelines offline, although operations have largely resumed.

Oil markets had found support last week after distillates posted a strong rebound last week after Central European refiners were cut off from Russian piped crude for a week and as more industries shifted from natural gas to heating oil.

Having drifted to a three-month low at the start of the week, diesel cracks rallied after news broke that Russian Transneft has halted crude flows through the southern branch of the Druzhba pipeline.

Diesel tightness was set to be a feature of the winter months, with more demand shifting away from natural gas after Dutch TTF gas futures jumped above €200/MWh – more than 10-fold their 2010-2020 average.

TTF prices for Sep22 on Monday settled at just over €220/MWh, around 7% higher on the day.