• Oil prices have dragged below $91.00 on downbeat Caixin Services PMI data.
• Firmer US NFP are likely to weigh pressure on the oil prices ahead.
• The impact of the OPEC production cut could be limited as many members have already failed in providing discussed quota.

West Texas Intermediate (WTI), futures on NYMEX, have declined to near $90.70 in the early European session as downbeat growth prospects have underpinned the risk-off market profile. The oil prices have dropped after facing sheer barricades of around $92.00.

The oil prices have shifted into a correction mode as weaker Caixin Services PMI data released last week is signaling a decline in demand for oil. The Caixin Services PPMI data landed at 49.3, significantly lower than the prior release of 55.0. It is worth noting that China is the largest importer of oil and a serious decline in oil demand from the dragon economy would have a significant impact on oil.

For September, the Caixin Manufacturing PMI data also dragged firmly, therefore an overall decline in Chinese economic activities is impacting the oil prices.

Adding to that, the firmer US Nonfarm payrolls (NFP) data has started weighing pressure on the black gold. An upbeat US labor market data has bolstered the chances of a bigger rate hike by the Federal Reserve (Fed). Solid economic fundamentals remain highly supportive substance for a rate hike consideration and out of that tight labor market is critical for tightening monetary policy.

On the supply side, last week’s production cuts announcement by OPEC+ pushed the oil prices into a bullish trajectory. The oil cartel announced a drop of 2 million barrels per day (bps) which is the biggest production cut since the Covid-19 pandemic. Well, the majority of the OPEC members have already failed to produce the discussed quota, therefore the impact could be lower than expected.