Reuters
Crude-oil prices moved higher on Tuesday, shaking off China’s official manufacturing data that showed a seventh consecutive contraction in February.
But investors remain concerned that oil demand from the world’s second-largest economy will slow.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in April CLJ6, +1.27% traded at $34.23 a barrel, up $0.48, or 1.4%, in the Globex electronic session. May Brent crude LCOJ6, +2.48% on London’s ICE Futures exchange rose $0.41, or 1.1%, to $36.98 a barrel.
China’s official manufacturing purchasing managers’ index, a gauge of the nation’s factory activity, fell to 49.0 in February from 49.4 a month earlier, official data from the National Bureau of Statistics showed. A PMI reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 points to a contraction.
However, some economists cautioned that seasonal factors were likely in play as most factories were closed for a week in February during the Lunar New Year break.
“Slowing manufacturing activities in China will definitely weigh on sentiment,” said Stuart Ive, a client manager at OM Financial.
“Slowing manufacturing activities in China will definitely weigh on sentiment.”
China’s aggressive consumption of oil has been a bright spot in the gloomy oil market. But as China moves gradually from a heavy industry-based economy to a more service-oriented one, analysts say the country’s oil-demand growth will weaken.
CLSA estimates China’s crude-oil imports will likely rise at least 6% this year, slowing from the 8.8% growth in 2015.
However, some analysts say China is still largely a manufacturing economy. They expect Chinese refiners and factory owners to take advantage of low oil prices, which could help support China’s demand for foreign oil.
“Chinese independent refiners are in the midst of hiking output, seizing the [relatively new] opportunity to process imported crude at the expense of fuel oil as a feedstock,” said consulting firm JBC Energy in a report.
Read: This is what drove the oil market’s wild February gyrations
Daniel Ang, an energy analyst at Phillip Futures, said profit-taking after the overnight rally also contributed to the decline. Oil prices rose overnight after China’s central bank lowered the amount of deposits that banks must hold in reserve by 0.5 percentage point late Monday, a sign the world’s second-biggest economy is seeking ways to prop up its slowing economy.
“This move, highlighting People’s Bank of China’s priority on economic growth and its equity market, has in turn suggested that China’s demand for commodities, especially crude oil, base metals and gold, will remain healthy in 2016,” said OCBC in a note.
Nymex reformulated gasoline blendstock for April RBJ6, -0.46% — the benchmark gasoline contract — fell 54 points to $1.3153 a gallon, while April diesel traded at $1.0905, 32 points lower.
ICE gasoil for March changed hands at $319.25 a metric ton, down $5.25 from Monday’s settlement.
