Oil slumped on Thursday after data showing that China’s manufacturing activity contracted for the fifth month in a row and as investors awaited the US personal consumption spending report later in the day for any clues to the interest rate outlook.
Brent crude futures for October, due Thursday, were down 9 cents, or 0.1%, to $85.77 a barrel as of 06:30 GMT. The more active November contract fell 10 cents, or 0.1%, to $85.14.
West Texas Intermediate (WTI) crude futures fell 6 cents, or 0.1%, to $81.57 for October.
China’s manufacturing activity also did not improve in August, raising concerns about weakness in the world’s second-largest economy, according to an official factory survey on Thursday.
According to the National Bureau of Statistics, the official Purchasing Managers Index (PMI) rose to 49.7 from 49.3 in July but remained below the 50-point level that separates contraction from expansion.
A tighter oil supply outlook in the US supported prices in the previous session, but this contradicts concerns about demand.
Overall, conflicting factors have driven prices into some volatility today, triggering wait-and-see processes as the focus shifts to the US Core Federal Reserve’s preferred version of the inflation indicator (PCE) later tonight.
Investors are watching inflation figures as measured by US personal consumption expenditures, which will be released on Thursday.
For now, oil prices are heading for a weekly rise as data shows the US government’s tighter-than-expected crude oil supply, while the military coup in OPEC member Gabon has added to fears of disruptions in crude oil supply.
Analysts expect Saudi Arabia to carry its 1 million barrels per day voluntary oil cut to October for the third month in a row. This adds to the cuts implemented by OPEC+, the Organization of the Petroleum Exporting Countries, and Russia-led allies.
Meanwhile, the US government slashed gross domestic product growth to 2.1% last quarter from 2.4% reported last month, and data released Wednesday showed private employment growth slowed significantly in August.
The former chairman of the Boston Fed said Wednesday that the Federal Reserve could end the cycle of rate hikes if the job market and economic growth continue to slow at the current gradual pace.
Sometimes bad news bodes well, as weak economic data in the US lowers expectations for another rate hike. High-interest rates reduce demand and cause oil prices to fall.