The Wall Street Journal is reporting that “China’s government’s official purchasing managers index (out Tuesday) fell to 49.7 in August-its lowest reading in three years“.
Despite price falls on Tuesday, Brent crude is up more than 24% and WTI up more than 27% after falling to the lowest levels in more than six years on Monday last week.
“It was primarily the China fear factor”, Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, told Reuters Global Oil Forum.
On Tuesday, Brent and U.S. crude ended approximately eight percent lower which marked the end of a twenty five percent surge seen over three-sessions earlier which was the largest gain since 1990. Earlier, the US benchmark fell to a low of $47.23/bbl, down $1.97/bbl. Follow on Twitterand on his Google+ profile.
There was a little bit of hope that OPEC would be willing to cut back on the output, which was fueled by a report OPEC released in which it reiterated that the cartel for oil is ready to talk to the other producers.
Trading sentiment remained distinctly weak after crude oil prices extended losses in Asia today on weak US and Chinese manufacturing data, while expectations of a bearish US stockpiles report also weighed on the prices, analysts said.
Indeed, Opec may act to keep Brent prices above the $50 mark, especially if demand from emerging markets falters, according to Bank of America Merrill Lynch.
Oil prices will move higher if Saudi Arabia makes a sacrifice and cuts its own production-and that would benefit every other producing nation, said Patrick Kerr, owner of private-investment firm The Kerr Organization.
Tehran is wasting no time in planning its comeback, and is aiming to ramp up production faster than many expect despite a supply glut that is killing prices.
While it has fallen fractionally this morning, the crude oil price enjoyed a spectacular rally late last week, jumping from below $38 to above $44 a barrel in the space of just two trading sessions.
Oil prices fell Monday, coming under pressure as dealers took profits from huge gains in last week’s rally and tried to gauge the outlook for the US economy and its need for crude.
The biggest drop in August came from Iraq, one of the main drivers of the rise in OPEC output this year. The refinery maintenance activity also results in limited supply.