- Manufacturing activity in China drops unexpectedly in April
- The US Federal Reserve expected to raise interest rates by 25 basis points this week
- US manufacturing is recovering from a 3-year low
- The latest OPEC+ production cuts of 1.16 million barrels per day take effect from Monday
TOKYO (Reuters) – Oil prices fell more than $1 a barrel on Monday after weak economic data from China and expectations of another U.S. interest rate hike outweighed support from the OPEC+ supply cuts that take effect this month.
Brent crude fell $1.27, or 1.6%, to $79.06 a barrel by 11:21 a.m. EDT (1521 GMT). US West Texas Intermediate (WTI) crude fell $1.39, or 1.8%, to trade at $75.39.
Official data showed on Sunday that China’s manufacturing activity fell unexpectedly in April, the first contraction since December in the manufacturing PMI.
The US Federal Reserve, which meets on May 2-3, is expected to raise interest rates by another 25 basis points. The dollar rose against a basket of currencies, making oil more expensive for holders of other currencies.
“We remain at the mercy of sentiment surrounding a Chinese recovery or lack thereof, while the backdrop in the US of continued monetary tightening leaves us in the ‘bad is good’ realm when it comes to economic data or news flow,” he said. Kepler analyst Matt Smith.
Banking concerns have weighed on oil in recent weeks and in what was the third major US institution to fail in two months, US regulators said First Republic Bank had been taken over and reported a deal to sell the bank to JPMorgan.
Voluntary production cuts of about 1.16 million barrels per day by members of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, in a group known as OPEC+, take effect from May.
Oil prices drew some support from manufacturing activity in the United States, retreating from a three-year low in April, as new orders improved slightly and employment rebounded.
“Crude oil prices are trimming losses on the back of optimism that the economy can strengthen now that the banking drama is behind us and in light of indications that factory activity is improving,” said Edward Moya, an analyst at OANDA.
Reporting by Katya Golubkova. Editing by Kenneth Maxwell
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