Brent crude oil held below $56 a barrel on Tuesday on signs of slowing growth in China and as Saudi Arabia said its production was close to an all-time high.
Factory activity in China, the world’s second-largest economy and top oil importer, slipped in March with the flash HSBC/Markit Purchasing Managers’ Index (PMI) reading at 49.2, below the 50-point level that separates growth from contraction.
Economists polled by Reuters had forecast a reading of 50.6.
Brent futures LCOc1 for May delivery were trading down 20 cents at $55.72 at 0856 GMT, while U.S. crude CLc1 dropped 31 cents to $47.14 a barrel. Its discount to Brent CL-LCO1=R widened to $8.58 a barrel.
The Chinese data followed comments from OPEC kingpin Saudi Arabia that it is pumping around 10 million barrels of crude per day, close to an all-time high and some 350,000 bpd above the figure it gave OPEC for its February output.
OPEC’s decision to fight for market share rather than cutting output has contributed to a halving in oil prices since June as the global surplus of oil supplies has grown.
The market is expected to be at its weakest in the second quarter as winter fuel demand wanes while peak summer driving activity is yet to kick in. Energy consultancy FGE forecasts a global surplus of 2 million barrels per day between April and June.
“We expect crude prices to be pressured once again,” FGE said in a note.
U.S. crude stocks, which already stand at their highest in at least 80 years, were forecast to have risen for an 11th record-breaking week, a preliminary Reuters survey showed.
The poll of six analysts, taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and the U.S. government’s Energy Information Administration (EIA), showed a crude stock build of 5 million barrels on average last week. [EIA/S]
In the week to March 13, U.S. crude stocks rose nearly three times as much as expected. Storage at the Cushing, Oklahoma oil hub, delivery point of the U.S. contract, reached a new record, EIA data showed.-Bloomberg
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