20 June 2013, News Wires – Oil slipped more than $1 on Thursday, its biggest daily slide in nearly three weeks, as slowing Chinese manufacturing activity unnerved investors already worried about the US Federal Reserve’s plan to roll back its stimulus later this year.
A bearish sentiment coursed through markets after data from China showed factory activity weakening to a nine-month low in June, heightening risks that a second-quarter slowdown in the world’s top energy consumer could be sharper than expected.
Assets priced in the dollar came under more pressure as the greenback firmed following Fed Chairman Ben Bernanke’s comments that the central bank may reduce its bond-buying programme, a key driver of global investment in riskier assets, with the goal of ending it in mid-2014.
Brent crude slipped $1.43 to $104.69 a barrel early on Thursday, while US oil fell $1.44 to $96.80. Both posted their biggest slide in percentage terms since 31 May.
“There are a few factors weighing on oil today. The Federal Reserve has confirmed that they are likely to taper down asset purchases,” said Lee Chen Hoay, an investment analyst at Phillip Futures.
“China’s latest PMI data is pointing to a slowdown in demand. As the world’s second-largest oil consumer, any slowdown in demand will weigh on prices.”
China’s economy grew at its slowest pace for 13 years in 2012 and so far this year economic data has underwhelmed, bringing warnings from some analysts that the world’s second-biggest oil consumer could miss its growth target of 7.5% for this year.
Oil also came under pressure from a surprise build in crude inventories in the world’s top oil consumer, the United States, despite the summer driving season being underway.
Crude stockpiles increased by over 300,000 barrels in the week to 14 June, compared with a Reuters poll that forecast a 500,000 barrel decrease.