Oil prices retreated in Asia Wednesday after a key measure of manufacturing in China fell to its lowest
level in more than six years, signalling weaker demand in the world’s top
energy consumer.
The prospects of weaker demand come as the oversupplied global oil market
is already troubled by expectations Iranian crude will return within months
if Tehran is found to have complied with a deal to curb its nuclear
ambitions.
US benchmark West Texas Intermediate for November delivery, a new contract,
fell 17 cents to $46.19 in afternoon trade. Brent crude for November declined
22 cents to $48.86.
“Crude oil prices were weighed by a double whammy of increasing prospects
of the return of Iranian oil on the market, as well as potential fall in
demand from China after the Chinese flash Purchasing Managers’ Index (PMI)
fell to a six-year low,” said Bernard Aw, market strategist at IG Markets in
Singapore.
The closely watched PMI for Chinese factory activity came in at 47 in
September, down from August and the lowest since March 2009.
A result below 50 indicates the manufacturing sector is contracting, while
anything above shows expansion.
Traders are closely watching the progress on Tehran’s compliance over its
deal with world powers that would see the lifting of sanctions, allowing it
to export more oil.
Iran said on Monday it had independently collected samples at a suspect
military site where illicit nuclear work is alleged to have occurred and
later handed them to UN inspectors who were not physically present.
Deflecting potential criticism, the chief of the UN’s International Atomic
Energy Agency said “the integrity of the sampling process and the
authenticity of the samples” was not compromised.
“Iran is more likely an extra supply risk now that the process for winding
back sanctions has begun,” British bank Barclays said in an analysis.
The market is also waiting for a report to be released later Wednesday on
US commercial crude inventories — a closely watched measure of demand in the
world’s biggest economy.