Crude falls on weak economic data, demand worries

03 October 2012 11:37  [Source: ICIS news]

SINGAPORE (ICIS)--Crude futures weakened on Wednesday, with ICE Brent falling by more than $1/bbl, amid demand worries following the release of further downbeat economic data from China and the eurozone.

At 10:07GMT, November Brent crude on London’s ICE futures exchange was trading at $110.62/bbl, down by 95 cents/bbl from the previous close. Earlier, the North Sea benchmark fell to a session low of $110.43/bbl, down by $1.14/bbl.

November NYMEX light sweet crude futures (WTI) were trading at $91.38/bbl, down by 51 cents/bbl from the previous close. Earlier, the US benchmark declined to a session low of $91.09/bbl, down by 80 cents/bbl.

Official data from China revealed that the purchasing managers index (PMI) for the service sector fell to 53.7 in September from 56.3 in August.

Earlier this week, official data had revealed that manufacturing in China contracted for the second consecutive month in September. China’s manufacturing sector PMI for September was 49.8, which – although up on the August figure of 49.2 – was still below the key 50 level. A PMI figure below 50 indicates a contraction in business activity.

Further downbeat economic data emerged on Wednesday from the eurozone. The widely followed Market Eurozone Composite (PMI) fell to 46.1 in September from 46.3 in August. The data indicated that the eurozone had slipped back into recession in the third quarter.

Spain’s Prime Minister Mariano Rajoy said on Tuesday that the debt-laden eurozone nation would not be requesting bailout funds in the coming days.

Bank of Spain warned in a report released last week that the Spanish economy had continued to significantly contract in the third quarter.

The Asian Development Bank (ADB) also lowered its growth forecast for Asia (excluding Japan) in 2012 to 6.1% from an earlier estimate level of 6.6% amid weak economic growth in the regions main export markets in the US and Europe.

A recent United Nation’s report forecasts that growth in Latin America and the Caribbean was also expected to slow in 2012, amid weaker growth in Brazil and Argentina. The UN report forecasts that growth in the area would slow to 3.2% in 2012 from 4.3% in 2011.

In its most recent monthly report, the International Energy Agency (IEA) forecast that global oil demand will grow by around 0.9% to 89.8m bbl/day in 2012. China and other developing economies, particularly India and Brazil, have been the drivers of oil demand growth in recent years.

By contrast demand from the developed world has contracted. According to the recent IEA data, demand in the developing world is expected to rise 2.7% in 2012 to around 43.5m bbl/day.

($1 = €0.81)

By: James Dennis
+65 6780 4327

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