Oil Price Sluggish After China Manufacturing Data

Crude-oil prices dropped in early Asia trade on Monday as lackluster Chinese factory activity data widened fears that demand from the world’s second-largest economy is likely to stay low.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in December traded at $46.39 a barrel, down $0.20 in the Globex electronic session. December Brent crude on London’s ICE Futures exchange fell $0.03 to $49.53 a barrel.

Earlier Monday, the Caixin China manufacturing purchasing managers’ index, a gauge of nationwide manufacturing activity, rose to 48.3 in October from 47.2 in September. The reading suggests the shrinkage in factory activity may be slowing, although it marked the eighth straight month of contraction. The official gauge of China’s factory activity, released Sunday, was unchanged at 49.8 in October. A reading above 50 indicates expansion in activity while one below that mark signals contraction.

China’s declining consumption of oil has been a major worry for the global energy sector. Plagued by oversupply and softening demand, oil prices have nearly halved from the same period a year earlier. With the expected resumption of Iranian oil exports in the coming months, analysts and industry leaders are bracing for a “lower for longer” scenario.

Even the news of a lower oil rig count in the U.S. last week–a decline of 16 to 578–failed to sustained the rally from last week.

Market Watch

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.