- Oil continues declines after falling above $1 in previous session
- China’s manufacturing activity in April records a surprise decline
- The US Federal Reserve expects a rate hike of 25 basis points
May 2 (Reuters) – Oil prices fell in Asian trading on Tuesday, extending losses from the previous session as weak economic data from China and expectations of a US interest rate hike weigh on the market.
Brent crude fell 0.3%, or 24 cents, to $79.07 a barrel by 0615 GMT, while US West Texas Intermediate (WTI) crude fell 0.3%, or 25 cents, to $75.41 a barrel. Both benchmarks fell more than $1 in their most recent session.
“The downward pressure on oil is that China’s economic recovery is not very promising, which is clouding the fuel consumption demand outlook,” said Tina Teng, an analyst at CMC Markets.
China’s manufacturing activity fell unexpectedly in April, official data showed on Sunday, the first decline in the manufacturing PMI since December.
China’s industrial and economic recovery from the coronavirus pandemic was expected to boost demand this year.
Despite China’s weak manufacturing data, there are positive signs of a recovery based on spending during the five-day Labor Day holiday at the world’s largest oil importer, analysts said in a note from ANZ Research.
“State broadcaster CCTV said sales at large retail and hospitality businesses were up 21% from a year earlier, based on data from the Department of Commerce. A record 19.7 million rail journeys were made across the country. A traffic volume of 20% is also expected. higher than 2019 according to local media.”
Over the weekend, CCTV reported that passenger traffic rose 151.8% on the first day of the holiday compared to the same day last year, while the number of air, road, water and rail trips on the day rose to 56.99 million.
Meanwhile, a survey Monday showed US crude inventories are expected to have fallen for a third straight week, giving some support to the market.
The poll came ahead of reports from the American Petroleum Institute, an industry group, due Tuesday at 4:30 p.m. EDT (2030 GMT) and the Energy Information Administration, the U.S. Department of Energy’s statistical division, due at 10 a.m. performed at :30 p.m. (1430 GMT) on Wednesday.
However, the US Federal Reserve, which meets on Tuesday and Wednesday, is expected to hike rates by another 25 basis points. Rate hikes by inflation-fighting central banks could impact oil prices by slowing economic growth and dampening energy demand.
Banking fears have also weighed on oil in recent weeks, and in the third major US institution to default in two months, US regulators seized First Republic Bank over the weekend ahead of a deal that would see JPMorgan most of its assets bought.
Reporting by Laura Sanicola; Adaptation by Stephen Coates
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