AFP reported that oil prices fell further over the prospect of weaker energy demand by China, a day after Brent futures closed down almost USD 4 on talk that Saudi Arabia was boosting crude supplies.
Brent North Sea crude for delivery in November dropped 96 cents to USD 107.23 per barrel in London midday deals. New York's main contract, light sweet crude for October slid 92 cents to USD 91.06 per barrel.
Analysts said that recent price support won from the US Federal Reserve's decision last week to embark on a third round of exceptional stimulus measures or quantitative easing had tailed off.
JBC Energy research group said that the extended losses are hinting more and more that the bullish impact of QE3 had already been priced into the market for several weeks and that the focus is now on weaker global economic growth indicators. Prices were retreating after data showed manufacturing activity in the world's largest energy consumer China contracting for the 11th straight month.
Mr Justin Harper a strategist at IG Markets Singapore trading group said that crude demand worries were stoked after British banking giant HSBC released data showing China's manufacturing sector still stuck in a rut. The China data has pushed down commodities after HSBC's flash PMI showed contraction for another month.
Mr Harper said that oil has been on the receiving end of this negativity towards the Chinese economy and more evidence of its continued slowdown. China is a major consumer of oil and any slowdown in its economy worries traders about future demand.
The bank said that the preliminary reading of the purchasing mangers' index for China released by HSBC hit 47.8 this month a mild improvement from a final reading of 47.6 in August. But the latest reading marked nearly a year of continuous contraction since November, underscoring broader economic weakness and shrinking demand in key overseas markets.
The index is closely watched as it gauges nationwide manufacturing activity, a key sector of the world's second largest economy. A PMI reading above 50 indicates expansion, while anything below 50 points to contraction. China's official PMI figure for August released earlier this month hit a nine-month low of 49.2.
Source - AFP
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