Oil prices fell on Tuesday on worries over a global glut, while surveys showing a contraction in manufacturing activity in China and Japan also dragged on market sentiment.
An expected drawdown in U.S. crude stocks, however, put a floor under prices.
Brent crude was down 5 cents at $63.29 a barrel as of 0651 GMT, after closing the previous session up 32 cents.
U.S. crude for August delivery fell 14 cents to $60.24 a barrel. The July contract, which expired on Monday, closed up 7 cents at $59.68 a barrel.
“I think the Japan and China PMI figures are weighing on the market,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance. China and Japan are Asia’s two biggest oil importers.
The HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index (PMI) edged up to 49.6 in June, a three-month high, from 49.2 in May, but remained below the 50 mark, which separates contraction from expansion.
Japanese manufacturing activity contracted slightly in June with the Markit/JMMA flash Japan Manufacturing PMI falling to a seasonally adjusted 49.9 in June from a final 50.9 in May.
“Although China’s figures picked up slightly, we continue to believe that growth remains weak as PMI figures are not moving past 50. We expect no change to crude demand from Japan and China in the near future with manufacturing PMI figures being weak,” Phillip Futures said.
Traders are now eyeing global oil supply levels for cues.
Growth in U.S. gasoline stocks, which increased by almost 500,000 barrels in the week to June 12, high U.S. crude output of about 9.6 million barrels per day and 2 million barrels per day of excess capacity by oil producers cartel OPEC added to oversupply concerns, Barratt said.
But analysts expect U.S. commercial crude oil stocks to have dropped by an average of 1.8 million barrels to around 466 million barrels last week.
Industry group, the American Petroleum Institute, will release its data on U.S. stocks on Tuesday at 2030 GMT, while the U.S. Department of Energy’s Energy Information Administration will publish its data on Wednesday at 1430 GMT.
Oil markets are also concerned about the speed with which Iran could increase oil exports if there is a deal between Tehran and six world powers over Iran’s nuclear program, a move that would lift Western sanctions, said Daniel Ang, an analyst at Phillips Futures.
Iranian Foreign Minister Mohammad Javad Zarif said he saw a good chance of reaching a final agreement with six world powers on Iran’s nuclear program by a June 30 deadline or a few days later, provided there was political will.
According to Barratt, Iran holds 30 million tonnes of crude oil on tankers at sea.
Source: Reuters
