Connect to share and comment
Global oil prices sank on Thursday in line with sharp falls on world stock markets, as traders worried about weak Chinese manufacturing data and the strong dollar following comments from Federal Reserve chief Ben Bernanke, dealers said.
Brent North Sea crude for delivery in July fell to a three-week low at $101.06 a barrel. It later stood at $102.06, down 54 cents from Wednesday's closing level.
New York's main contract, light sweet crude for July, slipped 71 cents to $93.57 a barrel.
"Oil prices still find themselves on a downward trajectory," said Commerzbank analyst Carsten Fritsch.
"The price weakness was sparked by comments by Fed Chairman Bernanke and poor economic figures regarding China.
"Compounding this is an ample supply situation, as official US inventory data confirmed again yesterday."
Crude futures had fallen on Wednesday following a bearish US oil inventory report and amid signs that the Fed's quantitative easing (QE) programme could be curtailed sooner rather than later.
Sentiment took another blow after HSBC bank said preliminary data showed that manufacturing activity in China slowed in May for the first time in seven months, in another sign of the weakness of recovery in the world's second-largest economy.
Its initial PMI for the month came in at 49.6, from a final 50.4 in April. A reading above 50 indicates growth and anything below points to contraction. The final result will be announced on June 3.
"Oil is on the downside with the Chinese PMI (purchasing managers' index) data...people were expecting that it would be soft but not to the extent of a contraction," Kelly Teoh, market strategist at IG Markets in Singapore, told AFP.
A strong dollar also weighed on crude prices after Bernanke told Congress on Wednesday that the US central bank could scale back stimulus measures soon if economic conditions improved.
But he said any tapering off could only happen once it had confidence that economic gains could be sustained, warning that a "premature tightening of monetary policy" could derail the economic recovery.
The US central bank has been on an aggressive $85 billion a month bond-purchase programme, or QE, as part of measures to boost the economy.
A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies. In turn, that tends to weigh on oil demand and prices.
The US government's Department of Energy had meanwhile announced on Wednesday that American crude oil inventories declined by 300,000 barrels last week. That was half the 600,000-barrel drop forecast by analysts in a Dow Jones Newswires poll.