Oil prices fall as China's manufacturing activity contracts

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By MG News | August 31, 2023 at 11:56 AM GMT+05:00

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August 31, 2023 (MLN): Oil prices remained under pressure on Thursday after Chinese data showed a drop in manufacturing activity, while investors also kept an eye on a U.S. personal consumption expenditure report due later in the day.

Brent crude is currently trading at $85.11 per barrel, down by 0.10% on the day.

While West Texas Intermediate crude (WTI) is trading at $81.36 per barrel, down by 0.08% on the day.

China's manufacturing activity contracted for a fifth straight month in August, an official factory survey showed on Thursday, fueling concerns around recent weak expansion data in the world's second-biggest economy, as Reuters reported.

The official purchasing managers' index (PMI) rose to 49.7 from 49.3 in July, according to the National Bureau of Statistics, staying below the 50-point level demarcating contraction from expansion.

A tighter U.S. oil supplies outlook supported prices in the previous session, but this was pitted against the headwinds in demand conditions, said Yeap Jun Rong, a market strategist at IG.

"Overall, the conflicting factors force prices onto some indecision today, further brought on by some wait-and-see as focus turns to the U.S. core PCE release later tonight," Yeap said.

Investors are eyeing inflation numbers as measured by the U.S. personal consumption expenditures, which will be released on Thursday.

For now, oil prices are headed for a weekly climb, with U.S. government data showing tighter-than-expected crude supplies, while a military coup in Gabon, an OPEC member, also raised fears of crude oil supply disruptions.

Analysts expect Saudi Arabia to roll over a voluntary oil cut of 1 million barrels per day for a third consecutive month into October, adding to the cuts in place by OPEC+, the Organization of the Petroleum Exporting Countries and allies led by Russia.

Meanwhile, the U.S. government has revised down the gross domestic product increase to 2.1% last quarter, from the 2.4% pace reported last month, and data released on Wednesday showed private payroll growth slowed significantly in August.

The Federal Reserve can end its interest rate increase cycle if the labor market and economic growth continue to slow at the current gradual pace, the former president of the Boston Fed said on Wednesday.

"Bad news was good, as weaker U.S. economic data lowered expectations of another rate hike," ANZ Research said in a note. Higher interest rates reduce demand and pressure oil prices down.

Copyright Mettis Link News

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