SINGAPORE- Oil prices fell in Asian trade Thursday after a closely-watched index showed that China’s key manufacturing sector contracted further in February to hit its lowest level in seven months.
US benchmark West Texas Intermediate (WTI) for March dropped 24 cents to $103.07 in afternoon trade, while Brent North Sea crude eased 55 cents to $109.92 for its April delivery.
British banking giant HSBC’s preliminary reading for its purchasing managers’ index (PMI) for China, which tracks manufacturing activity in factories and workshops, fell to 48.3 this month.
That marked a further tumble from the final reading of 49.5 in January, when the figure showed contraction for the first time in six months.
The index is a closely-watched gauge of the health of the world’s second biggest economy.
A reading above 50 indicates growth, while anything below signals contraction.
“The below 50 readings of the past two months leave little doubt that conditions in the manufacturing sector are downbeat,” Julian Evans-Pritchard, China economist at research house Capital Economics, said in a market commentary.
Investors will now focus on the US energy stockpiles report to be released later Thursday, delayed one day by Monday’s holiday in the United States.
Kenny Kan, market analyst at CMC markets in Singapore, said that there is “wide expectation” that stockpiles will fall due to the harsh winter weather, which has driven up demand for heating fuels and is supportive of prices.
Renewed conflicts in oil-exporting countries in Africa have also given support to Brent prices and raising concerns on the region’s stability.
Rebel forces in South Sudan on Tuesday launched a major assault against the key oil-hub of Malakal, officials said.