Crude oil sharply lower; Chinese PMI adds to demand concerns
2023.05.01 09:42
© Reuters.
Investing.com — Oil prices fell sharply Monday after weak Chinese manufacturing data raised doubts about the strength of the economic recovery in the largest importer of crude in the world.
By 08:50 ET (12:50 GMT), futures traded 2.2% lower at $75.12 a barrel, while the contract fell 2% to $78.76 a barrel.
Data released on Sunday showed that China’s declined to 49.2 from 51.9 in March, slipping into contraction territory.
This came as something of a surprise, especially after Chinese first-quarter exceeded expectations, and underlined the uneven nature of the recovery in the world’s second-biggest economy. This is the biggest growth driver in a region where traders expect most of the crude demand growth to come this year.
Back in the West, the is expected to lift interest rates this week, another step in its prolonged battle with inflation. This is expected to weigh on activity in the world’s largest consumer of crude, and has also boosted the Monday, making oil more expensive for other currency holders.
The is expected to follow the Fed’s lead later in the week in lifting interest rates, and the next week, and these aggressive rate hikes are prompting worries that large parts of Europe, as well as the U.S., will fall into recession later this year.
These demand concerns have outweighed the support coming from the voluntary output cuts of just over 1 million barrels per day by members of the Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, which are taking effect in May.
“Even the Biden administration must admit, at this point, that OPEC was right to cut production last October and it was right to do so in April,” said Ellen Wald, president of Transversal Consulting.
“However, this may not be enough to combat the perception of falling demand. OPEC’s April surprise had a strong price impact because it was a surprise. That element is now gone, as the market will now anticipate OPEC cuts even if the group says production will remain steady.”
