Oil Drops After Weak Chinese Data

Oil prices fell sharply on Tuesday after official data showed China’s manufacturing sector, one of the main engines powering the world’s biggest energy consumer, contracted at its fastest pace in three years.

China’s official Purchasing Managers’ Index (PMI) dropped to 49.7 in August from 50.0 in July, reinforcing concerns over the world’s second-largest economy.

The figures helped spur a retreat in oil prices after three days of hefty gains. Investors took profits after Brent and U.S. crude both soared more than 8 percent on Monday, traders said.

“It was primarily the China fear factor,” Carsten Fritsch at Commerzbank in Frankfurt told the Reuters Global Oil Forum.

Benchmark Brent crude LCOc1 dropped $2.53 to a low of $51.62 a barrel. It was trading around $51.90 by 1330 GMT. On Monday, Brent climbed $4.10, or 8.2 percent, extending a rally from a 6-1/2-year low at just above $42 on Aug. 26.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza