Oil down to near $93 on Chinese recovery concerns
The price of oil fell to near $93 a barrel on Thursday after a survey showed manufacturing activity in China falling to its lowest level in seven months, a sign that the recovery in the world's No. 2 economy is fading.
By early afternoon in Europe, benchmark oil for July delivery was down 99 cents to $93.29 a barrel in electronic trading on the New York Mercantile Exchange. The contract declined $1.90 to close at $94.28 a barrel on Wednesday.
HSBC Corp. said a preliminary version of its monthly purchasing managers' index fell to 49.6 for May from 50.4 in April. Numbers below 50 indicate contraction. Oil prices fell because a downturn in energy-hungry China would likely lead to a decline in crude demand.
"I think the economic slowdown in Europe, the U.S. and Japan is finally hurting China," said Francis Lun, chief economist at GE Oriental Financial Group in Hong Kong. "It confirms a pattern since the beginning of the year of a slow decline in the manufacturing sector."
Oil prices were also struggling as global markets turned sour due to signs that the U.S. Federal Reserve could slowly tighten its monetary policy. Equity markets posted large losses Thursday in Asia and Europe, including a 7.3 percent fall in Tokyo's Nikkei 225 index of shares.
Ample U.S. supplies of crude oil and refined products such as gasoline also weighed on prices, even though demand was expected to increase in the short term.
"A week ahead of the start of the summer driving season, (gasoline) stocks are 6 percent up on the long-term average and 10 percent higher than last year's level," said a report from Commerzbank in Frankfurt. "There is thus no reason to fear any gasoline shortage, even if the American Automobile Association (AAA) is anticipating the heaviest traffic in eight years this Memorial Day weekend."
Brent crude, a benchmark for many international oil varieties, was down 82 cents to $101.78 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline fell 1.01 cents to $2.8021 a gallon.
— Heating oil lost 1.49 cents to $2.8538 a gallon.
— Natural gas dropped 0.8 cent to $4.178 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.