LONDON: Oil dropped below $101 a barrel on Wednesday, extending its biggest monthly drop in 11 months in April, as fresh concerns over economic growth in China weakened the demand outlook.
Brent crude futures lost $1.60 cents to $100.77 a barrel by 1050 GMT. The benchmark had fallen more than 7 percent in April, hurt by indicators suggesting the global economy remains in a fragile state.
"The fall is a reaction to recent days' gains. We had a bit of a rebound but that is running out of steam with the Chinese data," according to Simon Wardell, analyst at Global Insight. Traders expected the contract to hold around $100 a barrel in the coming days.
US oil was down $1.20 at $92.26 a barrel, falling below its 50-day moving average, a key technical indicator watched by traders.
Growth in China's manufacturing sector unexpectedly slowed in April as new export orders fell, raising fresh doubts about the strength of the economy after a disappointing first quarter.
"It's the same picture of relative slow demand," Olivier Jakob, an analyst at Petromatrix, said.
Investors awaited US ISM manufacturing data later in the day after business activity in the US Midwest unexpectedly contracted in April to its lowest level since September 2009.
A two-day Federal Reserve committee meeting also wraps up on Wednesday, and the Fed is widely expected to maintain its stimulus policy to support an economic recovery that is still too weak for the job market to truly heal.
"There are going to be important macro movements over the next two days with the Fed and the ECB (European Central Bank) meeting tomorrow," Jakob said.
The ECB is widely expected to cut interest rates to a new record low of 0.5 percent after data on Tuesday showed inflation in the euro zone had fallen to a three-year low and unemployment had hit a record of 12.1 percent.
SUPPLY CONCERNS
The supply side also remained bearish. Data from the American Petroleum Institute on Tuesday showed US crude stocks rose by 5.2 million barrels, larger than a forecast 1 million barrel increase.
The more closely watched report from the Energy Information Administration (EIA) will be released at 1430 GMT.
Supply from the Organization of the Petroleum Exporting Countries is predicted to average 30.46 million barrels per day (bpd)in April, up from 30.18 million bpd in March, a Reuters survey showed.
Saudi Arabia's energy minister said on Tuesday the kingdom did not plan to expand its oil production capacity to 15 million barrels per day, dispelling a suggestion put forth by a member of the royal family.
The Buzzard oilfield in the North sea, an important contributor to the Brent crude benchmark, was on schedule to restart later on Wednesday, trade sources said, after a steam release caused the field to be shut down on Monday.
Comments
Comments are closed for this article.