Oil prices fall on weak China data, dimming deal hopes
AP FILE PHOTO
NEW YORK, United States—Oil prices tumbled Monday following disappointing Chinese economic data and doubts about an imminent deal of major petroleum producers to cut output.
US benchmark West Texas Intermediate for March delivery dropped $2 to $31.62 a barrel on the New York Mercantile Exchange.
Brent North Sea crude for April delivery shed $1.75 at $34.24 a barrel in London.
China’s official purchasing managers index, which tracks activity in factories and workshops, fell to 49.4 in January, its lowest level since August 2012 and well below the 50 mark that separates growth from contraction.
It was the sixth consecutive month the Chinese manufacturing PMI has signaled contraction, adding to concerns about slowing growth in the world’s largest energy consumer.
Analysts said traders were also increasingly skeptical of a potential deal anytime soon between Russia and members of the Organization of the Petroleum Exporting Countries to cut output in the glutted petroleum market.
Talk of such a deal had helped left oil prices last week, but has “little credibility,” said a note from Morgan Stanley.
“The market is quite convinced we’re not going to see anything immediately,” said Bart Melek, head of commodity strategy at TD Securities.
“We’re in a situation where the supply side isn’t likely to contract because of no OPEC-Russia agreement and then you have a new risk emerging that Chinese demand isn’t going to be there,” he said.
Analysts said some of the selling was also spurred by profit taking after oil prices rose in the last two weeks following a lengthy slide.
Excess supply and weak demand have pushed oil prices from above $100 a barrel in July 2014 to today’s levels slightly above $30 a barrel.
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