NEW YORK: Oil fell to a three-week low yesterday in a broader commodities selloff as a decline in China’s factory activity entrenched concern about weak demand, and worries about an early scale-back in US Federal Reserve stimulus haunted markets.
China’s factory activity shrank for the first time in seven months in May, a survey showed, weighing on oil as well as copper, for which China is the world’s top consumer.
Brent crude fell $1.22 to $101.20 a barrel by 11:16am EDT (1516 GMT) after dropping to $100.64, the lowest since May 2. Prices are down sharply from a 2013 high of $119.17 reached on Feb. 8.
US crude declined $1.36 to $92.92, paring losses after an earlier drop of over $2.
Sales of new US single-family homes rose 2.3 percent in April, and prices climbed to record high levels, offering strong proof the sector’s rebound trend is intact.
While signs of economic recovery would ordinarily be supportive for oil, market-watchers are interpreting news in light of how it may affect the US Federal Reserve’s quantitative easing policies that have pumped hundreds of billions of dollars into money markets, boosting many commodities, including oil.
“You can’t please these guys. Now every time we get data that’s good, it suggests we’ll get a tapering off the stimulus,” said Phil Flynn, analyst at Price Futures Group in Chicago, Illinois.
“So when we see housing data that blows away expectations, it makes us pull back a bit.”
Fed Chairman Ben Bernanke told a congressional committee on Wednesday the Fed could scale back the pace of bond purchases at one of its next few policy meetings.
Eurozone data yesterday offered little support for oil prices. While a downturn eased slightly this month, a dearth of new orders means the region’s economy is likely to contract again in the second quarter, surveys showed.
Oil also fell on Wednesday pressured by a rise in US petrol inventories.
A weekly US Energy Information Administration report showed gasoline stocks are close to their highest level for the time of year since 1999, indicating ample supply for the summer driving season when demand rises. Reuters
