Brent crude oil started July on its back foot on Monday as the commodity slipped on weakening demand prospects and a stronger dollar. Brent traded at $102.08 at 6:06 GMT on Monday morning, barely scraping above the $102 mark as investors eyed more poor Chinese data.
CNBC, reported that a private HSBC survey showed that China's manufacturing activity slipped on June, which added to growing concern that the number two oil consumer was slowing down. The figures were the lowest the nation has reported in nine months, which could spell trouble for the Chinese economy in the third quarter.
The US dollar strengthened after data on Friday supported the US Federal Reserve's plans to start tapering its bond buying as the nation's economy improves.
Improved US employment data released on Friday backed Fed Chairman Ben Bernanke's recent announcement that the bank was considering rolling back its $85 billion per month quantitative easing program once the US unemployment and other economic indicators show that the number one economy is ready to stand on its own. The dollar's strength brought down oil prices as it became more expensive for holders of other currencies.
In June, oil supply was reduced as Britain's Buzzard oil field temporarily slashed its output and OPEC reduced its outflow after geopolitical problems in Libya and Nigeria caused interruptions.
Investors are also keeping an eye on the Middle East as the standoff between Iran and the US has continued despite a new, milder Iranian President. Many are hoping that the new Iranian President, Hassan Rouhan, will improve the nation's tense relationship with the West over Tehran's nuclear program.
On Sunday, a US energy official remarked that the oil market could withstand tougher sanctions on Iranian oil which has led many to believe that progress is unlikely.
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