MW: Oil slips on China data, ahead of supply figures
By Carla Mozee and Sara Sjolin, MarketWatch
LONDON (MarketWatch) — Crude-oil futures slumped Tuesday after weaker-than-expected factory activity in China highlighted worries about softening energy demand.
Oil for June delivery CLM3 -1.10% fell 83 cents, or 0.9%, to $88.34 a barrel on the New York Mercantile Exchange.
Front-month oil futures have slumped more than 8% this month, hurt in part by concerns about lackluster oil demand in a well-supplied market. The next reports on weekly U.S. crude-oil inventories are due out Tuesday and Wednesday.
Underscoring demand concerns on Tuesday were data from China — the world’s second-largest economy and top oil consumer — that showed manufacturing-activity growth slowed this month.
The preliminary or “flash” version of HSBC’s manufacturing purchasing managers’ index fell to a two-month low of 50.5 from March’s final reading of 51.6. The April result was below a Bloomberg forecast of 51.5.
The headline index remained above the 50 mark that divides growth from contraction, but the subindex for new orders showed expansion at a slower pace than in March.
The data “prompted growing fears that oil demand could decline in the world’s second-most important oil consumer country, which in previous years has been a driving factor for global oil demand,” analysts at Commerzbank wrote in a note.
“According to the [International Energy Agency], China is also set this year to account for half of the expected growth in demand. Saudi Arabia’s oil shipments to Asia have not increased recently, which points to subdued demand from this region,” they added.
A week ago, it was disappointing quarterly economic growth and monthly industrial-production numbers from China that added to demand concerns.
After trading ends Tuesday on the New York Mercantile Exchange, the American Petroleum Institute is slated to issue its weekly report on crude-oil stockpiles at 4:30 p.m. Eastern time. The data will be followed by the Energy Information Administration’s report, due on Wednesday at 10:30 a.m. Eastern time. Analysts surveyed by Platts expect, on average, a build of 1.4 million barrels in U.S. crude-oil stocks.
“A build of this size — which is roughly a third of the seasonal week-on-week change in the [Energy Information Administration’s] five-year average — would put U.S. crude inventories just over 9% above the five-year average of 356.130 million barrels,” Platts said in a statement.
Analysts polled by Platts also expect a decline of 700,000 barrels in U.S. gasoline inventories, while distillate stocks are projected to be down by 450,000 barrels.
Checking prices for other energy products on Tuesday, natural gas for May delivery NGK13 +0.14% rose 1 cent, or 0.3%, to $4.28 per million British thermal units.
May gasoline RBK3 -1.75% lost 4 cents, or 1.5%, to trade at $2.73 a gallon, and May heating oil HOK3 -0.56% declined 1 cent, or 0.5%, to $2.80 a gallon.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin.
