WTI crude fell more than $2 and went below the 200-day moving average. The fall was triggered by Chinas factory activity decline, which was shown by the Advance Manufacturing Purchasing Managers’ Index, conducted by Markit Economics and HSBC Holdings Plc,for May. The indicator 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. U.S. July crude traded at a three-week low of $92.28 a barrel at 14:04 GMT, which is lower than the 200-day moving average of $92.29.
Oil prices also experienced downward pressure after market research group Markit announced its preliminary manufacturing PMI index for the U.S. economy. It fell to a seven-month low of 51.9 in May, down from a final reading of 52.1 in April. China and the U.S. are the worlds two biggest oil consumers.
Oil prices were 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”.
The greenback also increased its value following the release of the Fed minutes yesterday where 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.
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