Oil prices fall sharply over poor economic data from China
Oil prices in global markets have fallen sharply once again as poor economic data came out of the world’s number one energy consumer, China.
Oil prices had seen some boost in recent days due to speculation about the possibility of Russia and member states of the Organization of the Petroleum Exporting Countries (OPEC) reaching an agreement to slash output in the oversupplied market, AFP reported on Tuesday.
However, after skepticism about such a deal started to rise in markets, the upward momentum in global markets hit a snag starting in late Monday trading.
To add to the market misery, reports came in denoting that manufacturing activity in China had contracted at its fastest pace in more than three years in January.
At about 1725 GMT on Tuesday, US benchmark West Texas Intermediate for delivery in March stood at USD 30.32 a barrel, showing a decrease of USD 1.30 compared with Monday's close.
Meanwhile, Brent North Sea crude for April also shed USD 1.12 to be sold at USD 33.12 a barrel.
According to a market commentary by Capital Economics, last month's rise in prices "was based on shaky foundations, namely hopes that Russia and OPEC would agree to cut output."
The commentary added, “We doubt that there will be any coordinated agreement even though the market remains oversupplied. Meanwhile, US inventories of both crude oil and gasoline have continued to build over the last month. Indeed, US crude oil stocks are now at record highs.”
Oil prices in global markets have fallen by around 70 percent since June 2014 as supplies piled up and demand was hit by a global economic slowdown led by China, the world's second biggest economy.
Data released by the Chinese government on Monday showed that China's Purchasing Managers' Index (PMI), which tracks activity in the country’s factories and workshops, had fallen to 49.4, the lowest figure since 49.2 in August 2012, and below market expectations.
PMI readings above 50 are considered a sign of expanding economic activity, while anything below indicates a slowdown.
"Global economic growth remained lackluster at the start of this year," Dutch bank, ABN-AMRO, said in a note.
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