Oil prices slid on Wednesday after disappointing Chinese
manufacturing data added to mounting concerns about the economy of the world’s
second-biggest crude buyer.
On the New York Mercantile Exchange, light, sweet crude
futures for delivery in November CLX5, +0.80%
traded at $46.12 a barrel, down $0.24 in the Globex electronic session.
November Brent crude LCOX5, +0.45% on
London’s ICE Futures exchange fell $0.32 to $48.76 a barrel.
Nymex crude prices are down roughly 7% month-to-date while
Brent is down 9.4% in the same period.
An early reading from Caixin Media Co. and research firm
Markit Ltd. showed Chinese manufacturing activity fell to a six-and-a-half year
low of 47.0 in September from a final reading of 47.3 in August.
A reading above 50 indicates expansion from the previous
month, while a reading below that indicates contraction.
Asian markets reacted negatively to the data. The Hang Seng
Index HSI, -2.26% was down 2.1% while
the Shanghai Composite Index SHCOMP, -2.19%
lost 1.3%. Australia’s S&P ASX 200 XJO, -2.07% fell 1.5% and South Korea’s Kospi SEU,
-1.89% slipped 1%.
Capital Economics said that while China’s weaker-than-expected
manufacturing numbers added to worries over Chinese growth, broader economic
indicators don’t point to a deepening economic crisis just yet. “With most of
the key leading indicators such as fiscal spending and credit growth now
looking supportive, we continue to expect a cyclical recovery in economic
activity over the coming quarters,” the research firm said.
Oil prices, along with the overall commodities sector, have
been increasingly sensitive to any negative news on China’s economy in recent
weeks, and market sentiment has capped price gains.
“The data underscores the possibility of a hard landing in
China, but the recent declines in U.S. crude supply are lending some support to
market,” said Virendra Chauhan, an oil analyst at Energy Aspects.
Late Tuesday, the American Petroleum Institute’s latest
report showed crude-oil stocks in the U.S. declined 3.7 million barrels for the
week ended September 18. While this is sharper than expected and is temporarily
supportive for oil prices, traders are monitoring the official Department of
Energy data slated for release later Wednesday.
Estimates from 13 analysts surveyed by the Wall Street
Journal showed that U.S. oil inventories are projected to have fallen by
100,000 barrels, on average, in the same week. Seven analysts expect stockpiles
to fall, while six expect a rise. Forecasts range from a rise of 3.3 million
barrels to a drop of 3 million barrels.
Oil prices have been in a prolonged slump since last summer
and many in the industry forecast a “lower for longer” scenario on continued
oversupply concerns, which have been exacerbated by the expected return of
Iranian oil to the market as early as next year.
“Assuming an extra 0.5 million barrels per day in Iranian
supply on top of recent Organization of Petroleum Exporting Countries
production, combined with some weaker seasonal demand in the first half of
2016...surplus could expand to 2 million barrels in the second quarter of 2016
before shrinking again,” said Tim Evans, an energy analyst at Citi Futures.
Nymex reformulated gasoline blendstock for October — the
benchmark gasoline contract — fell 102 points to $1.4062 a gallon, while
October diesel traded at $1.5303, 17 points lower.
ICE gasoil for October changed hands at $467.50 a metric
ton, up $7.75 from Tuesday’s settlement.
source: marketwatch.com
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