Brent slips over weak China demand growth
Singapore, July 24, 2013
Brent futures slipped towards $108 on Monday as weak China data renewed concerns over demand growth from the world's second-biggest oil consumer, but continued falls in refined product and crude stocks in the United States helped stem losses.
Activity in China's vast manufacturing sector slowed to an 11-month low in July as new orders faltered, suggesting the economy is still losing momentum. Yet, if US government data validates an industry report that showed surprise drops in US product stocks, particularly gasoline, oil may recoup losses.
Brent crude slipped 25 cents to $108.17 a barrel by 0317 GMT, after settling 27 cents up on Tuesday. US oil fell 30 cents to $106.93, after ending 29 cents higher.
"The weak China data is likely to weigh on prices," said Lee Chen Hoay, an investment analyst with Phillip Futures. "But a major factor that will support prices is the drawdown in US stocks. Assuming the EIA numbers are in the same direction, crude prices will remain supported."
The US Department of Energy's Energy Information Administration (EIA) inventory data is due later in the day.
The surprise falls in oil product stockpiles in the United States, based on data from industry group the American Petroleum Institute on Tuesday, revived hopes of a rise in demand growth in the world's biggest oil consumer.
Both US gasoline and distillate fuels stockpiles, which include diesel and heating oil, fell several hundred thousand barrels versus expectations in a Reuters poll of gains of more than a million barrels, the API data showed.
The surprises overshadowed a smaller-than-expected fall in crude stocks, indicating healthy US oil demand.
Oil prices also continue to be supported by unrest and tension in the Middle East, with a bomb killing one and wounding 17 in Cairo early on Wednesday.
The next psychological barrier for both Brent and the US benchmark is $110 a barrel because the difference between the two contracts have narrowed sharply, said Lee.
Brent's premium to US oil futures, which narrowed sharply last week and briefly inverted on Friday, remained thin at about $1.23 a barrel on Wednesday.
The flash HSBC/Markit Purchasing Managers' Index fell to 47.7 this month from June's final reading of 48.2, marking a third straight month below the watershed 50 line which demarcates expansion of activities from contraction.
This is the weakest level since August 2012.
A sub-index measuring employment slid to 47.3 in July, the weakest since March 2009. It stood at 47.6 in June and has been below 50 for four months in a row.
Brent is biased to drop to $106.86 as indicated by its wave pattern and a Fibonacci retracement analysis, according to Reuters technical analyst Wang Tao. - Reuters
More INTERNATIONAL NEWS Stories
- Two Europeans not on board 'missing' Malaysian jet
- China draws red line on North Korea
- Saudi sentences three to death for 2003 bombing
- First bitcoin machine opens in UK
- US sanctions will boomerang, warns Russia
- China plans $50bn bank to fund projects
- Sony to sell Tokyo 'birthplace'
- Obama orders sanctions over Russian moves
- Crimea parliament votes to join Russia
- Arab League to be revamped
- 'Upskirting' is legal: Massachusetts court
- Singapore probes 'unnatural' death of bitcoin trader
- Onus on world powers for Syria war crimes: UN
- US, Russia set for talks on Ukraine crisis
- Brent oil drops below $109
- Services outshine manufacturing, pushing up jobs
- Bitcoin bank shut down after hacker attack
- India to kick off world's biggest poll on April 7
- China signals focus on reforms
- Hundreds ready for bitcoin exchange class action
- Space taxi, Jupiter mission in Obama budget
- Putin: Use of force last resort in Ukraine
- Powers to boost Lebanese military, economy
- Egypt bans Hamas activities in Egypt
- Putin ends army exercise, markets rally
- Russia has violated international law: Obama
- Russian markets hit as Putin tightens grip on Crimea
- Iran nuclear deal 'being implemented as planned'
- Global factory growth stumbles as demand falters
- Obama warns of 'fallout' for Israel if peace effort fails