Oil prices tumble in Asia on Chinese data
[SINGAPORE] Oil prices tumbled in Asia on Tuesday, surrendering some of their big gains after fresh data showed manufacturing activity in top energy consumer China contracted in August, analysts said.
The contraction in the Purchasing Managers' Index (PMI) for China's factory sector added to concerns about the health of the world's second biggest economy.
US benchmark West Texas Intermediate (WTI) for October fell US$1.50 to US$47.70 and Brent crude for October dropped US$1.46 to US$52.69 a barrel in late-morning Asian trade.
WTI surged 8.8 per cent and Brent advanced 8.2 per cent on Monday as the US government lowered its domestic production estimate and the Opec cartel said it was "ready to talk" to producers about prices which had fallen to their lowest levels in six and a half years last month.
The PMI for China's key manufacturing sector slumped to a three-year low of 49.7 in August, an official index showed, in the latest sign of slowing growth in the country, a major engine for global economic growth.
The reading, which tracks activity in China's vast factory and workshop sector, was worse than the 50.0 reading in July, and the first time it showed contraction since February. A figure above 50 signals expansion in the sector, while anything below indicates shrinkage.
US financial giant Citigroup said in a market commentary that China was driving commodity prices, including oil, "as never before, and it is driving them lower".
"We expect China to continue to exert downward pressure on commodity prices in the coming months, representing one of the three key drivers for commodity prices." Other analysts said the global crude oversupply remains a drag on prices despite talk by the US and the Organisation of the Petroleum Exporting Countries (Opec) of possible cuts in the elevated production levels.
"Firstly, talk is cheap," said Nicholas Teo, market analyst at CMC Markets in Singapore.
"Secondly, even though US production has started to fall, June production was still up 7.1 per cent over a year ago," he said in a market commentary.
"In the near term, there is likely to be little or no relief on either the supply or demand fronts," said business consultancy IHS.
"In particular, the oversupply problem could take a long time to correct."
AFP
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