Oil prices sink on poor Chinese data, eurozone tension

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Oil prices tumbled on Wednesday as traders worried about slumping manufacturing activity in top global energy consumer China, and new tensions over the impact of the eurozone sovereign debt crisis.

Traders will analyse later on Wednesday an official weekly update of crude stockpiles in the United States, the world's biggest oil consumer.

Approaching midday in London, Brent North Sea crude for delivery in January declined by $1.36 to $107.67 a barrel.

New York's main contract, light sweet crude for January, sank $1.86 to $96.15.

"Oil prices are under pressure on the back of negative economic data from China," said Commerzbank analyst Carsten Fritsch.

China's manufacturing activity slumped to its lowest level in 32 months in November, banking giant HSBC said on Wednesday, renewing concerns that the Asian powerhouse is losing steam amid global economic woes.

The preliminary HSBC purchasing managers' index (PMI) dropped to 48 in November -- the lowest since March 2009 -- compared with 51 in the previous month, HSBC said in a statement.

A reading above 50 indicates the sector is expanding while a reading below 50 suggests contraction.

Crude futures were also hit by the stronger greenback, which makes dollar-priced oil more expensive for buyers holding other currencies.

The European single currency slid to $1.3374 -- the lowest level since October 10, on mounting concern over the eurozone crisis.

Germany suffered very weak demand for 10-year bonds issued on Wednesday, the country's finance agency said, adding that the disappointing auction "reflected market nervousness."

In addition, sentiment was hit by news that eurozone private sector activity retreated for the third month running in November as businesses worry about the impact of the debt crisis on the economy, according to a key survey.

The oil market was also dented by weak economic growth data in the United States.

The US Commerce Department on Tuesday sharply lowered its third quarter growth estimate for the world's biggest economy to 2.0 percent from the 2.5 percent first stated.

Oil prices had risen earlier this week on worries that the market could tighten after several Western countries imposed economic sanctions on crude producer Iran over its nuclear programme.

© 2011 AFP

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