Crude oil prices declined and hovered below $97 a barrel in Asian trading Monday as weaker-than-expected Chinese manufacturing growth weighed on sentiment.
Light sweet crude for May delivery declined 0.39 percent or 40 cents to $96.80 a barrel in electronic trading on the New York Mercantile Exchange during Asian trading hours. Brent crude oil futures for the May delivery fell 0.33 percent or 44 cents to $109.66 a barrel on the ICE futures exchange in London.
Traders’ sentiment turned negative after official data released Monday showed that Chinese manufacturing activity improved less-than-expected in March. The data released by the China Federation of Logistics and Purchasing Saturday showed that the official Purchasing Managers' Index (PMI) surged to a 11-month-high of 50.9 in March from 50.1 in February but fell short of Reuters' estimate of a reading of 52.0.
Meanwhile, the final reading of the HSBC Flash Purchasing Managers' Index (PMI), a measure of the nation-wide manufacturing, also came in weaker-than-expected. The PMI rose to 50.6 in March from February’s final reading of 50.4 but slightly missed analysts' estimate of 51.7, signaling possibly slower demand growth in the world's second-largest oil consuming nation.
"The data came in below market expectations, which could indicate that oil demand growth may not expand quite as quickly as we would like it to. But China's still growing and that continues to be an underlying support factor long term for the market. Whether they are at 6 percent or 7 percent they are growing," Carl Larry, president of Oil Outlooks and Opinion, based in Houston, told Reteurs.
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Adding to the downtrend, the Bank of Japan’s quarterly Tankan survey showed that business sentiment at large manufacturers remained less-than-expected in the three months ending March. The quarterly index picked up to -8 in March from -12 in December but fell short of economists’ estimate of a reading of -7, suggesting that the weaker yen is yet to boost conditions for exporters in the world’s third largest oil consumer.
Oil futures advanced Thursday, the last session of the first quarter, as encouraging data on the U.S. economic recovery buoyed sentiment. The U.S. Department of Commerce announced Thursday that economic activity in the world’s largest economy grew at an annual rate of 0.4 percent in fourth quarter, better than its prior estimate of 0.1 percent growth.
Light sweet crude for the May delivery gained 65 cents and settled at $97.23 a barrel on the New York Mercantile Exchange, while Brent crude for the May delivery advanced 33 cents and settled at $110.10 a barrel. In the first quarter, U.S. crude futures climbed 5.9 percent while Brent futures slipped nearly 1 percent, reflecting the difference in sentiment about signs of improvement in the U.S. economy and concerns over the European crisis.