Crude oil trades at 6-week low as global growth concerns weigh

Crude oil futures were lower for the fourth consecutive day during European morning hours on Thursday, as market sentiment was hit by global growth concerns following the release of weak manufacturing data from China and France. Prices have been under heavy selling pressure in recent sessions amid signs that top oil exporter Saudi Arabia was pumping more oil. The country’s output is near the highest level in more than three decades, according to a Persian Gulf official with knowledge. On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD91.42 a barrel during European morning trade, dropping 0.95%. Earlier in the session prices fell by as much as 1.1% to hit a daily low of USD90.97 a barrel, the weakest level since August 6. Fresh concerns over the outlook for growth in China were fueled by data earlier showing that the HSBC flash purchasing managers' index ticked up to 47.8 in September from a nine-month low in August of 47.6, but remained below 50 for an 11th consecutive month in a row, showing the sector was still contracting. China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand. A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of the euro zone’s ongoing debt crisis. Separately, concerns over the worsening of the debt crisis in the euro zone resurfaced after preliminary data showed that manufacturing activity in France tumbled unexpectedly in September, dropping to a three-and-a-half year low. France’s manufacturing PMI fell to 42.6 in September from a final reading of 46.0 in September. Analysts had expected the index to come in at 46.4. Service sector activity in France declined to a four-month low of 46.1 in September from a final reading of 49.2 in August. Futures managed to come off the lowest levels of the session after data showed manufacturing activity in Germany in September contracted at the slowest rate in six months, while service sector activity grew modestly. Germany’s manufacturing PMI rose to 47.3 in September from a final reading of 44.7 in September. Analysts had expected the index to come in at 45.3. Service sector activity in Germany increased to a four-month high of 50.6 in September from a final reading of 48.3 in August. Oil traders often use manufacturing numbers as indicators for future fuel demand growth. Oil prices were also weighed by a surprise increase in U.S. oil stockpiles. Weekly data from the U.S. Energy Department on Wednesday showed that crude oil supplies rose by 8.5 million barrels last week, surging past expectations for a 1.0 million barrel increase. The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand. Meanwhile, uncertainty over whether Spain is about to ask for more financial aid continued to weigh on sentiment. Markets were eyeing an auction of 10-year Spanish government bonds later in the day, as it was expected to be an important test of investor appetite for the country’s debt. The risk-off trade environment prompted investors to pile in to the relative safety of the U.S. dollar, with the euro dropping to a one-week low against the greenback. The dollar index, which tracks the performance of the U.S. dollar against a basket of six other major currencies, was up 0.55% to trade at 79.60, the strongest level since September 13. A stronger dollar makes U.S. commodities more expensive for importers holding other currencies such as yen or euro. Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery shed 0.5% to trade at USD107.69 a barrel, with the spread between the Brent and crude contracts standing at USD16.27 a barrel. Prices fell to as low as USD107.19 a barrel earlier in the session, the weakest level since August 3. London-traded Brent prices continued to come under pressure from recent comments made by Saudi Arabia, saying that the Kingdom was likely to keep output high in an effort to lower prices further weighed on the energy complex. Analysts said that the market is now balancing Saudi assurances that it would make up for any supply shortfalls against the potential risk for the loss of oil from Iran amid tighter Western sanctions on Tehran over its disputed nuclear program.

Courtesy: ForexPros