Slack in China and Euro manufacturing sector prompts drop in current crude oil prices

The European region and China experienced a slack in the manufacturing sector, triggering a decrease in oil, albeit with an increase in speculations that demand will taper off.

Futures dropped by 1.8 percent following a sluggish Chinese economy six months in a row this April.  China’s oil consumption went down further, the lowest ever for the past six months.  Productivity-wise, the European services and manufacturing sector slid to lower levels.

“The Chinese manufacturing numbers are a bit disappointing as is the European data,” noted VP for Research, PFGBest-Chicago Phil Flynn.  “The apparent slowdown in manufacturing in these important markets is raising demand concern.”

At the N.Y. Mercantile Exchange, current crude oil prices for June delivery slid by $1.63 to a level of $102.25 per barrel by 9:45 a.m. Initially, futures dipped to $102.1 per barrel. Year-on-year prices have dropped by almost 9 percent.

Meantime, at the ICE exchange of London, Brent oil for June settlement slipped by $1.27 to a level of $117.49 per barrel. The Euro benchmark contract went up from $14.88 to $15.24 to N.Y. futures

Based on initial PMI readings by Markit Economics and HSBC Holdings Plc, China’s manufacturing sector is projected to shrink to 49.1 by April vis-a-vis 48.3 the past month.

“Negative data from China is contributing to oil’s weakness today,” disclosed Christopher Bellew, a Jefferies Bache Limited broker. Amid disappointing figures, foreign investments continue to find its way into China.

China’s demand for crude oil slowed down to 9.51 million bpd the past month, the lowest point reached since October last year.  Data was gathered from Bloomberg and the measure was arrived at by summing up figures for oil production and net imports.

In 2010, China came in as second biggest oil consumer in the world (11 percent), following the U.S. which came in first (21 percent).

According to the IEA, China triggered an upward movement of gas and diesel prices which may further weaken demand in the United States.