Oil futures settled with a loss of nearly 3% on Monday, with weaker-than-anticipated quarterly economic growth and monthly industrial production numbers from China adding to festering worries about global demand for the commodity.
Bearish news flow for oil is “due almost entirely to lower demand expectations,” said Michael Peterson, managing director of energy research at MLV & Co.
Oil’s decline on Monday was also part of a broad commodity selloff, with gold dropping more than $140 an ounce.
China said gross domestic product rose 7.7% in the January-March quarter, slower than growth of 7.9% in the fourth quarter, and below expectations for an 8% gain in separate surveys from Dow Jones Newswires and Reuters.
The report of slower activity for the major energy consumer came after the International Energy Agencyand the Organization of the Petroleum Exporting Countries reduced each of their own global oil-demand estimates for the year slightly. Oil futures fell by 1.5% last week.
Among the data from China on Monday, March industrial production increased 8.9% from the year-earlier period, missing the Dow Jones Newswires forecast for a 10% gain. The growth was the weakest in more than a year, slowing from a 9.9% average rise for the January-February period.
“Indeed, 2013 is starting to look eerily like 2012: Last year, a ramp-up in economic activity through the first few months proved short-lived, precipitating a mid-year slump and an aggressive policy response. Unfortunately, the cost of repeating this strategy looks to be prohibitively high,” economists at IHS told clients Monday.
“Another year of propped-up growth via state spending and a credit deluge would, we fear, push China dangerously close to proving [former premier] Wen Jiabao correct — that the current economic model is ‘unsustainable.’ If something is unsustainable, at some point, it won’t be sustained,” the economists wrote.
Still, analysts at the Kilduff Report pointed out that the China data was “not horrific, so the reaction seems outsized. The data point on oil was, after all, for demand growth.”
On Friday, oil dropped $2.22, or 2.4%, to $91.29 a barrel, the lowest close for a most-active futures contract since March 6, according to FactSet data. The decline came after soft U.S. retail-sales and consumer-sentiment reports.
London-traded May Brent crude also suffered on Monday, falling $2.72, or 2.6%, to end at $100.39 a barrel on ICE Futures.
Among other energy products, May gasoline futures shed over 4 cents, or 1.6%, to $2.76 a gallon. Gasoline futures last week fell 2.2%.