Oil prices drop on China data

4th June 2013, Comments 0 comments

Global oil prices slid on Tuesday as dealers took profits from the previous day's gains and on lingering concerns over weakening Chinese demand.

In midday trade in London, Brent North Sea crude for delivery in July shed 18 cents to $101.88 per barrel.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for July, lost 40 cents to $93.04 a barrel.

Crude futures had rebounded on Monday, following sharp pre-weekend losses, as Iraq's top energy official told AFP that the country wants to tighten production amid sagging global demand forecasts.

"Crude prices continue to edge lower after choppy trading yesterday," said Sucden analyst Kash Kamal on Tuesday.

"Worries over sluggish demand capped a late rebound in trading yesterday as weaker ISM manufacturing statistics highlighted the current weaker economic conditions."

The market had also tracked the weak dollar on Monday after the ISM purchasing managers index for the US manufacturing sector in May took an unexpected turn into contraction territory.

The rising US currency makes dollar-priced oil more expensive, denting demand.

The Institute for Supply Management purchasing managers' index for May fell to 49.0, one point below the line between growth and contraction, compared with a positive 50.7 in April.

In addition, poor Chinese data continued to dent sentiment on Tuesday.

"Economic results out of China are putting downward pressure on prices," Victor Shum, managing director at IHS Purvin and Gertz in Singapore, told AFP.

"China's economy is probably cooling, and this has sparked concerns about demand."

Global banking giant HSBC said Monday that its reading of China's manufacturing activity shrank more than first reported in May, confirming the first contraction in seven months.

HSBC's final purchasing managers' index (PMI) reading for May came in at 49.2, the lowest for eight months and worse than the preliminary 49.6 announced on May 23.

A reading below 50 indicates contraction in the sector.

Later this week, traders will focus on Friday's US nonfarm payrolls data.

The figures are likely to provide clues on whether the Federal Reserve will maintain its economic stimulus measures.

© 2013 AFP

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