CHENNAI: Brent crude futures slipped towards $102 a barrel on Thursday as fresh data from China cast doubt on the strength of recovery in the world's second-biggest oil consumer and the dollar weighed on commodity markets.
China's factory activity shrank in May, with the preliminary purchasing managers index (PMI) slipping to a seven-month low, reflecting slower local demand as well as headwinds from the United States and the European Union.
"China's demand for oil will be impacted because the PMI numbers show that the economy is not doing as well as the market had expected," said Chen Hoay Lee, an investment analyst at Phillip Futures, a Singapore-based commodity brokerage.
"The weak PMI and the strong dollar will pressure Brent towards the $100 mark in the near term."
Front-month Brent futures fell 40 cents to $102.20 per barrel by 0445 GMT, after having dropped more than a dollar in the previous session.
US crude dropped 40 cents to $93.88, extending the previous day's losses after inventory data suggested the gasoline market was well supplied ahead of the driving season.
China's flash HSBC Purchasing Managers' Index (PMI) for May fell to 49.6, while a sub-index measuring overall new orders also dropped to an eight-month low, suggesting the domestic economy is not strong enough to offset soft external demand.
The Euro zone's PMI, due later on Thursday, may also offer clues to the health of the troubled region's economies.
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