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Oil sinks on Cyprus woes, eurozone data

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(Globalpost/GlobalPost)

Global oil prices slid on Thursday as traders worried that the unresolved Cyprus situation could worsen the eurozone debt crisis and slash global crude demand, analysts said.

The market also fell as traders banked profits despite strong manufacturing data in China, which is the world's biggest consumer of energy.

In late afternoon London trade, Brent North Sea crude for delivery in May sank $1.02 to $107.70 per barrel.

New York's main contract, West Texas Intermediate (WTI) or light sweet crude for May, dropped 56 cents to $92.94 a barrel.

The European Central Bank warned on Thursday it was ready to pull the plug on emergency funding for Cyprus banks as the island's politicians scrambled to raise billions of euros to head off financial meltdown.

In another blow to sentiment, the eurozone Purchasing Managers' Index (PMI), published by London-based Markit, showed that the German economy was starting to be affected by the problems in the rest of Europe and that the French slowdown was accelerating.

Overall the eurozone PMI, a leading indicator of growth, fell to four-month low of 46.5 points in March against 47.9 in February.

"Concerns about demand for oil intensified following the release of disappointing eurozone PMI readings and after the ECB issued an ultimatum to Cyprus to come up with a bailout plan by Monday or else it would suspend its provision of emergency liquidity," said GFT analyst Fawad Razaqzada.

Prices had rallied in New York on Wednesday after the US Department of Energy reported an unexpected decline of 1.3 million barrels in oil stocks in the week ending March 15.

That confounded market expectations for a large gain of 1.7 million barrels, suggesting stronger-than-expected demand in the United States, which is the world's top crude consumer.

Crude futures were also strengthened by the Federal Reserve's widely expected move to maintain its stimulus programme on Wednesday.

The Fed kept its easy monetary policies in place, saying high unemployment and the government's sharp spending cuts remain barriers to full recovery from the 2008 crash.

On Thursday, meanwhile, figures from HSBC bank showed that manufacturing activity in China, the world's largest energy user, improved in March after expanding at its slowest pace in four months in February -- lifting hopes for a pick-up in the world's number two economy.

The bank's preliminary Chinese PMI, a widely watched barometer of the health of the Asian powerhouse economy, came in at 51.7 for the month from 50.4 in February.

A reading above 50 points to growth while anything below indicates contraction.

"The fact that we are seeing a continued expansion is a good sign of China's economic progress," noted Jason Hughes, head of premium client management at IG Markets Singapore.

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http://www.globalpost.com/dispatch/news/afp/130321/oil-sinks-cyprus-woes-eurozone-data