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Tuesday, May 24, 2022

Poor Chinese factory data weighs on oil prices

Oil prices fell for a third straight day Friday as ample crude supplies continued to pressure sentiment and a sharp drop in Chinese manufacturing renewed concerns about demand.

US benchmark West Texas Intermediate (WTI) for September delivery fell 31 cents to $ 48.14 a barrel on the New York Mercantile Exchange, the lowest level since late March.

Brent North Sea crude for September, the global benchmark, closed at $ 54.62 a barrel in London trade, down 65 cents from Thursday’s settlement.

“This week we saw (US) crude oil inventories increase again despite the fact that refiners are working at historically high levels,” said Andy Lipow of Lipow Oil Associates. “We continue to see a more than adequate supply of crude oil.”

Unexpectedly weak Chinese manufacturing data raised fresh worries about the slowdown in the world’s second-largest economy and largest energy consumer.

A key gauge of manufacturing activity tumbled to a 15-month low in July.

“Whenever we see signs of an economic slowdown in China we know it’s going to affect oil demand,” Lipow said.

In a note to clients, JPMorgan (LSE: JPIU.L – news) analysts said that recent demand data for China, India, Japan and South Korea has “disappointed”.

“While Asian demand growth has softened, product supply in Asia has also increased,” they said in a note.

The WTI losses accelerated after oilfield services company Baker Hughes reported the US oil rig count rose by 21 this week.

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