Oil prices have dropped sharply with tepid manufacturing data in China adding to concerns about slow growth in the world’s largest energy consumer.
The benchmark US futures contract, West Texas Intermediate for delivery in May, finished New York trade on Tuesday at $99.74 a barrel, down $1.84, or 1.8 per cent, from Monday’s close.
Brent North Sea crude for May sank $2.14, or almost 2.0 per cent, to $105.62 a barrel in London trade.
“Concerns about the Chinese economy are making things pretty bearish,” said Michael Lynch of Strategic Energy and Economic Research.
China’s official purchasing managers index (PMI) for the manufacturing sector crept up to 50.3 in March, from an eight-month low of 50.2 in February, narrowly above the 50 level that signals expansion.
The reading was slightly better than expected but still continued to point to weakness, suggesting China’s economy grew in the first quarter below the government’s annual growth target of 7.5 per cent.
HSBC also reported its own PMI for China fell to 48.0 in March, the lowest reading in eight months.
“From a Chinese oil demand perspective the number raises concerns about overall global oil demand growth as most expected that demand would be driven by China,” said Phil Flynn of Price Futures Group.
Also weighing on oil, analysts said, were expectations the US government’s weekly oil inventories report on Wednesday will show another increase in crude oil supplies.
Tim Evans of Citi Futures said consensus expectations were for a build of roughly 2.5 million barrels in crude inventories.
In addition, the market was under pressure by reports Libya may be close to reaching a deal with rebels who have blockaded oil terminals since July, analysts said.
Government and rebel sources said a deal appeared imminent, potentially unblocking exports that dwindled to 250,000 barrels a day from 1.5 million under the blockades.