Brent Slides on Chinese PMI
Brent crude oil weakened on Thursday morning after poor economic data caused many to revise their outlook for global demand. The commodity traded at $106.87 at 7:26 GMT as gains from a reduction in US oil stocks failed to prop Brent prices up.
A disappointing purchasing managers' survey from China weighed on Brent prices as investors worried that the number two oil consuming nation was losing footing. Bloomberg reported that the PMI reading was 47.7, which is below the 50 point benchmark and indicates a contraction. Although the reading is preliminary, if the figure is confirmed in the August 1st final report, it will be China's lowest reading in 11 months.
The Energy Information Administration released data on Wednesday which showed both gasoline and middle distillate stocks in the US fell despite predictions of gains. The news was expected to drive Brent prices higher, but the poor PMI data outweighed any gains from the falling US inventories.
The report showed that US crude inventories dropped by nearly 30 million barrels in the four weeks leading up to July 19th, which is the largest four week decline since they began keeping records in 1982. The data sends a positive signal to investors who are hoping the US will drive demand in the future.
Geopolitical tension has long kept Brent prices above $100 and although conflict in the Middle East and Africa fell into the background on Thursday, it remained a threat to supply interruption. Investors were reminded earlier in the week that the trouble in Egypt is far from over after a bomb in Cairo killed one and wounded 17. As the nation attempts to rebuild after President Mohammed Morsi was ousted, investors are worried about damage to the Suez Canal.
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