Crude-oil futures were only slightly higher Wednesday despite a slowdown in China's manufacturing activity contraction, as weaker-than-expected macroeconomic releases in the euro zone hit market sentiment.
The preliminary HSBC China Manufacturing Purchasing Managers Index rose to 49.1 in October, the highest reading since July, but remained below 50 points, the level that separates contraction and expansion. China is the world's second-largest oil consumer.
"This morning has brought a slight recovery, thanks to encouraging economic data from China," Commerzbank said in a note.
But the euro-zone PMI was weaker-than-expected, while a German business sentiment survey by the Munich-based Ifo also showed a drop. The releases helped the dollar strengthen against the euro, putting pressure on dollar-denominated oil prices.
At 0957 GMT, the front-month December Brent contract on London's ICE futures exchange was 55 cents, or 0.5%, higher at $108.80 a barrel. The front-month December contract on the New York Mercantile Exchange was trading up 24 cents, or 0.3%, at $86.91 per barrel.
Oil prices have been hit by global economic concerns in recent weeks, and "if the current run of sentiment continues, it is hard to see where support for oil prices could come from other than the geopolitical arena," PVM brokerage said in a note.
Geopolitical tensions are plentiful, including Iran, Syria, Lebanon and Libya, and "the ingredients are there for an excuse to go long in oil again whenever the herd decides to start running in that direction," PVM added.
The recent sharp downward correction in oil prices is likely to be getting close to the bottom, said Olivier Jakob, managing director of Swiss consultancy Petromatrix.
Later Wednesday all eyes will be on the U.S., where manufacturing PMI numbers, official U.S oil inventories data and the Federal Open Market Committee monetary policy announcement are due, though "no one is expecting much out of the FOMC meeting," Mr. Jakob said.
The U.S. Department of Energy is expected to report a 1.8 million barrel rise in U.S. crude oil inventories last week, according to analysts surveyed by Dow Jones Newswires. Late Tuesday, the American Petroleum Institute, an industry body, said inventories rose by 313,000 barrels.
At 0957 GMT, the ICE's gasoil contract for November delivery was up $9.50, or 1%, at $964.25 per metric ton, while Nymex gasoline for November delivery was 198 points, or 0.8%, higher at $2.6248 per gallon.
Write to Konstantin Rozhnov at konstantin.rozhnov@dowjones.com
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