China data sends Brent crude tumbling

A European Union oil embargo on Iranian oil shipments, which took effect on Sunday, should lend some support to prices, but analysts said the grim global macroeconomic picture was likely to cap possible gains.

Brent crude fell $1.17 to $96.63 a barrel while US crude shed $1.20 to trade at $83.76.

On Friday, Brent crude rose more than $6 a barrel while US crude jumped by more than $7, their fourth largest daily gains in dollar terms since the contracts were launched.

The gains were largely due to the optimism that coursed through financial markets after European leaders reduced the risk of a eurozone break-up by striking a deal to strengthen the region’s banking system and reduce the borrowing costs for Italy and Spain.

The upbeat mood soured after manufacturing activity in China, the world’s second biggest economy, worsened in June with export orders, usually an indicator of the economic health of North America and Europe, posting their biggest fall since December.

“Chinese data is one of the contributors to the softer turn this Monday, but I think the oil market has had time to think about the implication of the EU deal over the weekend and is reacting now,” said Ric Spooner, chief market analyst at CMC Markets. A firmer dollar also weighed on commodities priced in the greenback.