Oil fell by 1 per cent or more on Monday on a slump in Chinese demand. Photo: Akos StillerOil fell by 1 per cent or more on Monday on a slump in Chinese demand and worries that OPEC's decision to pump crude without restraint could prolong the current supply glut, although a weaker dollar limited losses.
China, the top net oil importer in the world, bought about a quarter less crude oil in May than it did in April, official data showed on Monday. In the oil products category, imports fell by more than 6 per cent, against a 10 per cent drop in exports.
Refineries in China used more crude from stockpiles last month, leading to lower imports, the data suggested. A higher number of processing plants for crude that were offline for maintenance was also cited for the lower demand.
Still, some traders said the 26 per cent month-on-month drop in crude imports, based on May's arrival of 5.47 million barrels per day versus April's record 7.37 million barrels bpd, was an anomaly.
"A 4-6 per cent drop is acceptable for refinery maintenance season in China, but 20 per cent or more is a sign of demand collapse," said Bob Yawger, director of energy futures at Mizuho Securities USA.
Phil Flynn, an analyst at Chicago-based Price Futures Group, said a continuous slump in Chinese demand could be a "game changer" for oil bulls determined to see Brent futures at above $US65 a barrel and U.S. crude futures at above $60 a barrel.
Brent settled down 62 US cents, or 1 per cent, at $US62.69 a barrel.
US crude settled down 1.7 per cent, or 99 US cents, at $US58.14.
"If the dollar didn't take a dive today, oil would have fallen a lot more, given the worries post-OPEC ," said Tariq Zahir, managing partner at Tyche Capital Advisors in Laurel Hollow, New York.
The dollar was down 1 per cent, making commodities priced in the greenback, including oil, more affordable for holders of the euro and other currencies.
OPEC said on Friday it would maintain its output target of 30 million bpd. Its members actually pump between 1 million and 2 million bpd more.
Barclays said the surplus supply in crude will likely last through 2015, though it could get smaller. "The oil market still looks like it is heading for trouble," the bank said in a report.
Morgan Stanley said it expected attention to be more be on how quickly Iranian oil returns to the market with the lifting of sanctions on Tehran as it adheres to a nuclear deal with the West.