Brent Crude Below $101 Amid China Economy Slowdown

Brent crude fell today to a three-week low below $101 together with other commodities as WTI crude, silver, platinum and palladium following negative economy information about Chinas factory activity. The Advance Manufacturing PMI for China for May, conducted by Markit Economics and HSBC Holdings Plc, dropped to 49,6, which is a negative value as 50 is the neutral point. It is the lowest value since October and is below forecasts.

Mark Keenan, director of commodities research and strategy at Societe Generale SA in Singapore said: “China’s PMI data coming in below forecast is adding a strong downdraft across most commodity markets today.

Brent crude fell by $1.40 and traded at $101.20 a barrel by 13:49 GMT. Chen Hoay Lee, an investment analyst at Philip Futures, said: “Chinas demand for oil will be impacted because the PMI numbers show that the economy is not doing as well as the market had expected. The weak PMI and the strong dollar will pressure Brent towards the $100 mark in the near term.”

Oil prices are experiencing further pressure by the strengthened greenback after yesterday Ben Bernanke, Fed chairman, said the U.S. may scale back its monetary easing measures in the next few meetings, if the labor market improves further. He said the Quantitative Easing program is currently providing “significant benefits”. Meanwhile at the release of the Fed minutes yesterday it came to notice that some policy makers think the stimulus measures should be scaled down in June. Strengthening of the dollar tends to decrease the prices of the dollar-priced commodities as it makes the greenback more attractive for investors. Also a more expensive dollar makes commodity prices costlier for foreign currency holders.

Following yesterdays U.S. oil reserves report, prices slipped as U.S. gasoline inventories rose more than expected according to the Energy Information Administration’s. Stockpiles rose by 3 million barrels, compared to the forecasts of a 0,1 decrease.

Oil prices found some support today as good economic news came out for the European Union. The Advance Manufacturing Purchasing Managers’ Index for France and Germany improved and exceeded forecasts. The Advance Services Purchasing Managers’ Index for France remained unchanged, compared to a forecast for a slight increase and in Germany it rose, but below expectations.