Oil slides on weak China data

1st July 2010, Comments 0 comments

World oil prices fell close to 74 dollars on Thursday, on concern about weak Chinese manufacturing data and rising US gasoline stockpiles, analysts said.

New York's main contract, light sweet crude for delivery in August, dipped 91 cents to 74.72 dollars a barrel.

Brent North Sea crude for August sank 1.01 dollars to 74.00 dollars per barrel in early afternoon London trade.

"Crude oil prices extended losses ... amid expectations of a weaker oil demand from China, following the poor Chinese PMI figures this morning that hurt sentiment for risk appetite," said Sucden analyst Myrto Sokou.

Manufacturing activity in China slowed in June, official and independent surveys showed Thursday, suggesting that government efforts to cool the fast-growing economy are working.

The HSBC China Manufacturing PMI, or purchasing managers index, fell to 50.4 last month from 52.7 in May, the bank said. A reading above 50 means the sector is expanding, while below 50 indicates an overall decline.

A separate survey released by a government agency on Thursday showed manufacturing activity slowed to 52.1 in June from 53.9 in May.

Oil had also fallen on Wednesday on weak jobs and inventory data in the United States, the world's biggest energy consumer, followed by number two China.

The market reacted to news that the US private sector created only 13,000 jobs in June compared with expectations of 61,000.

It additionally digested data showing that US gasoline, or petrol, inventories rose unexpectedly last week, signaling weak demand.

The US Department of Energy said that gasoline stockpiles rose by 500,000 barrels in the week ending June 20, while analyst predictions had been for a fall of 400,000.

A rise in oil inventories is seen as a sign of weak demand and the weekly US energy report is widely watched because Americans are the world's biggest oil consumers.

"The market was caught off guard by the gasoline build, and that has really dragged crude oil down," said analyst Andy Lipow of Lipow Oil Associates.

Gasoline inventory data is closely watched at this time of year, with the US summer holiday period representing the traditional peak demand season for motor fuel.

Analysts from the Commonwealth Bank of Australia also said oil demand appeared far from strong at the moment.

"US oil demand is recovering but the recovery in oil demand is proving to be moderate and haphazard," the bank said in a market commentary.

© 2010 AFP

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