Oil Holds Below $60 as China Manufacturing Shows Slowing Demand
Oil held below $60 in New York as a Chinese manufacturing gauge weakened in April, signaling fuel demand is slowing in the world’s biggest energy consumer.
Futures in New York rose 0.1 percent after falling 0.8 percent on Friday. The final Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 48.9, missing the median estimate in a Bloomberg survey. Iraq, OPEC’s second-largest producer, boosted crude exports in April to the highest level in more than three decades, according to the Oil Ministry.
Oil’s rebound from a six-year low in March has faltered amid speculation that global consumption is failing to recover quickly enough to ease a supply glut. U.S. crude inventories have expanded to the most in 85 years even as drillers cut the number of active rigs to the fewest since September 2010.
“The market is currently capped by the fairly disappointing PMI data from China,” Andy Sommer, an analyst at Axpo Trading AG in Dietikon, Switzerland, said by phone. “This suggests ongoing weak demand over the next couple of months.”
West Texas Intermediate for June delivery was at $59.19 a barrel in electronic trading on the New York Mercantile Exchange, up 7 cents, at 11:57 a.m. Dubai time. The contract dropped 48 cents to $59.15 on Friday. Total volume was about 57 percent below the 100-day average. Prices have increased 11 percent this year.
Brent for June settlement was unchanged at $66.46 a barrel on the London-based ICE Futures Europe exchange. Prices fell 32 cents to $66.46 on Friday. The European benchmark crude traded at a premium of $7.27 to WTI.
Brent will be about $70 a barrel by the end of the year, Sommer said.
Chinese Factories
The Chinese PMI was lower than a preliminary reading of 49.2 and a second month below 50, the level that indicates contraction. This contrasts with an official manufacturing gauge May 1 that signaled growth may be starting to stabilize.
China, the world’s second-largest oil user, will account for 11 percent of global demand this year, according to projections from the Paris-based International Energy Agency. The U.S. is the biggest consumer.
Iraq shipped 92.3 million barrels of crude in April, Asim Jihad, an Oil Ministry spokesman, said by text message Friday. That’s equivalent to 3.08 million barrels a day, compared with 2.98 million a day in March.
The Organization of Petroleum Exporting Countries pumped 31.3 million barrels a day in April, data compiled by Bloomberg showed. Production exceeded the group’s quota of 30 million a day for an 11th consecutive month. OPEC’s 12 members supply about 40 percent of the world’s oil.
Rig Count
Drillers in the U.S. reduced the number of active machines by 24 to 679 last week, according to data from Baker Hughes Inc., as oilfield-services company. The rig count has dropped 57 percent from the start of December.
The decrease in the number of rigs and a weaker dollar prompted speculators to abandon hedges on the U.S. Oil Fund, the biggest exchange-traded fund tracking crude futures. The Chicago Board Options Exchange Crude Oil Volatility Index slid to 35.62 on Friday, the lowest level since Dec. 5. The gauge of hedging costs lost 32 percent in April, the most on record.
Source: Bloomberg – Oil Holds Below $60 as China Manufacturing Shows Slowing Demand
