June 19, 2024

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Crude oil falls on weak Chinese manufacturing data; Fed decision eyed

2 min read

Oil prices fell Wednesday after weak Chinese manufacturing activity data raised concerns surrounding demand growth in the world’s largest crude importer.

By 09:15 ET (14.15 GMT), the U.S. crude futures traded 0.6% lower at $77.39 a barrel and the Brent contract dropped 0.4% to $82.18 a barrel.

Chinese manufacturing activity disappoints

Manufacturing activity in China, the world’s second-largest economy, contracted for a fourth straight month in January, in the first official snapshot of how this crucial market–China is the biggest importer of oil in the world–has started the new year.

The official purchasing managers’ index rose to 49.2 in January from 49.0 in December, an improvement but still below the 50-mark that separates growth from contraction.

A quick return to above-trend economic growth in China was behind the bullish forecasts of oil demand growth for 2024 from both the International Energy Agency and the Organization of Petroleum Exporting Countries earlier this month.

The International Monetary Fund on Tuesday lifted China’s growth forecast this year to 4.6% from 4.2% in October, but there must still be doubt about this recovery given a property downturn, local government debt risks, deflationary pressures and weak global demand.

U.S.’s Middle East response awaited

That said, losses are relatively minor and the market as a whole is on course to register a first monthly gain since September as flaring tensions in the Middle East heightened supply concerns.

The U.S. has vowed to take “all necessary actions” to defend its troops following a deadly drone attack in Jordan.

The Biden administration has accused Iran of backing the militants who committed the attack, and while Tehran has denied involvement, Iranian oil exports are potentially vulnerable via potentially greater enforcement of sanctions.

“The market is trading cautiously ahead of the potential U.S. response to the recent assault in Jordan and how Iran will react in turn,” analysts at ING said, in a note.

Fed decision, official inventory data due

Staying with the U.S., inventory data from the American Petroleum Institute indicated that crude stockpiles dropped by 2.5 million barrels in the week ended Jan. 26, more than expected.

The more widely followed numbers from the government’s Energy Information Administration are due later in the session.

Also of major interest will be the latest policy decision by the Federal Reserve, with the U.S. central bank widely expected to keep interest rates unchanged later Wednesday.

Traders will be looking for clues as to when Fed officials think rate cuts are in order, as a cut could boost economic activity and this the demand for crude.

Source: Crude oil falls on weak Chinese manufacturing data; Fed decision eyed (msn.com)

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