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Oil falls on concerns for China demand, Fed policy
Thursday - 5/23/2013, 12:24pm EDT
NEW YORK (AP) - The price of oil fell Thursday as weak manufacturing data from China raised questions about the strength of oil demand in the world's No. 2 economy.
Oil's decline was exacerbated by sharp declines in global stock markets amid indications that the U.S. Federal Reserve's may pull back on its economic stimulus program. An earlier loss of $2 a barrel was trimmed by midday, however, as U.S. stock markets recovered.
Benchmark oil for July delivery was down 64 cents to $93.64 a barrel in midday trading on the New York Mercantile Exchange.
HSBC Corp. said a preliminary version of its monthly purchasing managers' index fell to 49.6 for May from 50.4 in April. Numbers below 50 indicate contraction. Oil prices fell because a downturn in energy-hungry China would likely lead to a decline in crude demand.
Oil prices struggled as global stock markets turned lower due to signs that the U.S. Federal Reserve could slowly tighten its monetary policy. Equity markets posted large losses Thursday in Asia and Europe, including a 7.3 percent fall in Tokyo's Nikkei 225 index of shares. U.S. stock markets fell initially then recouped some earlier losses. On Wednesday, stocks slumped in the afternoon when minutes from the Fed's last policy meeting showed some members favored slowing the central bank's stimulus program.
Ample U.S. supplies of crude oil and refined products such as gasoline are also weighing on oil, even as the summer driving season gets underway in the U.S. with Memorial Day weekend. AAA's prediction that for the third time in four years more than 31 million Americans would hop in the car and drive 50 miles or more didn't sway analysts.
"Ahead of the start of the summer driving season, (gasoline) stocks are 6 percent up on the long-term average and 10 percent higher than last year's level," said a report from Commerzbank.
The average price of a gallon of gas held steady at $3.66, up 6 cents from a week ago although still 2 cents cheaper than at this time last year.
Brent crude, a benchmark for many international oil varieties, was down $1.05 to $101.55 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
_ Wholesale gasoline fell 1 cent to $2.81 a gallon.
_ Heating oil lost 2 cents to $2.85 a gallon.
_ Natural gas rose 3 cents to $4.22 per 1,000 cubic feet.
Pablo Gorondi in Budapest and Pamela Sampson in Bangkok contributed to this report.
(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)