Oil futures were trading lower in London Monday, continuing a price drop that began Friday, after poor economic data called China's recovery into question.
Brent crude on the ICE futures exchange was down 55 cents, or 0.5%, at $105.85 a barrel. Light, sweet crude for March delivery was down 48 cents, or 0.5%, at $97.01 a barrel on the New York Mercantile Exchange.
Official Chinese Manufacturing PMI for January came in at a six-month low. The dip in fortunes for one of the world's biggest manufacturers and oil consumers reinforcing concerns about the slowing growth, said JBC Energy.
"Only the gloomiest of commentators would have predicted such a traumatic beginning to the year," said David Hufton, a market analyst at oil brokerage PVM.
One cause might be Federal Reserve tapering, but PVM said this was well signaled and that a further $10 billion cutback was "priced in" to oil's value.
"That leaves the gun pointing at China and the return of the hard versus soft landing debate," said Mr. Hufton.
The spread, or price difference between European crude and the U.S. benchmark, narrowed to around $8.80 a barrel, its closest since Nov. 8. If the crudes reach parity, the dynamics of import and export could change. Currently there is little incentive for U.S. refiners, for example, to import foreign crude as domestic crude is available at a discount.
An important U.S. pipeline is one step closer to approval, but Morgan Stanley predicts further delays and the development of alternative projects.
The Keystone XL pipeline is expected to stream crude from Canada into the U.S., once it is built.
But Morgan Stanley said in a note to clients "startup before 2016 is unlikely, in our view, and further delays are likely."
Moreover, repeated setbacks mean Canadians searching for alternatives: "Canada is targeting a number of coastal pipeline options by the end of the decade that offer better markets," Morgan Stanley wrote. "Oil sands producers need a near-dated option to bridge to these new pipelines, but XL is unlikely to be the answer."
Recently the ICE's gas oil contract for February delivery was down $11.00 at $906.00 a metric ton, while Nymex gasoline for March delivery was down 4 points at $2.6310 cents a gallon.
