Brent crude eased below $108 a barrel today after data showed China's manufacturing activity continued to contract, weakening sentiment further in a market already reeling from Saudi Arabia's pledge to keep global oil prices low.
US crude futures dropped to a six-week low after data showed crude stockpiles had jumped far more than expected last week due to a surge in imports.
"Saudi Arabia's commitment has been the biggest factor in the decline this week as a lot of money managers are cutting their long positions in oil after the statement," said Ken Hasegawa, a commodity sales manager with Newedge in Tokyo. "China PMI data was also a big trigger and with the market already in a downtrend, we are seeing more profit-taking."
Brent November crude eased 38 cents to $107.81 a barrel at 6.45am (Irish time), its fourth day of losses. The contract fell more than 3 per cent to $107.40 in the previous session, its lowest since August 3rd.
US October crude, which expires later today, was down 96 cents at $91.02 a barrel. The more actively traded November contract slipped $1.04 to $91.26 a barrel.
The HSBC Flash China manufacturing purchasing index (PMI) for September was 47.8, well below the 50-mark that separates contraction from expansion, although a shade higher than the nine-month low of 47.6 reached in August.
The Chinese data comes a day after the Ministry of Commerce said export outlook was poor and demand would remain weak in the next few months.
Analysts said the data might be a sign that the slowdown in the economy is coming to an end, which in turn may limit expectations of stimulus action from the authorities and weigh on the country's demand for commodities.
"If China hits a wall, and Europe falls out from under us, then we're going to be falling back into a recession, and that could be worse than the Great Depression," said Tony Nunan, an oil risk manager at Mitsubishi Corp in Tokyo.
Adding to the bearishness is Saudi Arabia's pledge to keep prices from rising too much.
Saudi oil minister Ali-al Naimi last week said the world's top oil exporter was ready to take action to calm rising prices, which he said were not supported by market fundamentals.
Some traders said the statement was a sign that there was no need to release strategic reserves, a move the United States is said to be mulling.
Also in the United States, crude stockpiles jumped 8.5 million barrels last week, far more than the 1 million barrels forecast in a Reuters poll of analysts, according to data from the Energy Information Administration.
US imports of crude jumped by 1.28 million barrels per day to 9.81 million barrels per day. Net crude oil imports hit their highest weekly level since January.
Reuters
