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Slowing China pushes oil prices lower

Chinese PMI indicates economic recovery not firing on all cylinders.

By Daniel J. Graeber
Slowing China pushes oil prices lower
Crude oil prices down for second straight day as Chinese manufacturing data reaches a point that shows a decline in overall activity. File photo by Monika Graff/UPI | License Photo

NEW YORK, May 3 (UPI) -- Crude oil prices retreated Tuesday for the second straight day after Chinese data showed a contraction in the nation's manufacturing sector.

A January collapse in the Chinese stock market helped push crude oil prices into the $30-per-barrel range as global economic recovery developed too slowly to take in the glut of oil on the market. Prices recovered substantially in April as market watchers said balance was returning, though recent sentiments have pulled on enduring optimism.

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Financial group Caixin reported Tuesday its view of the Chinese Manufacturing Purchasing Managers' Index showed a reading of 49.4 for April, a figure that represents a formal contraction for the sector.

Weak foreign demand and lingering market concerns at home added to an overall sense of caution, analysts said.

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"Overall, the data showed the foundation of China's economic recovery was yet to solidify and the government still needs to pay attention to downside risks," He Fan, a chief economist at Caixin, was quoted as saying by the official Xinhua News Agency.

Crude oil prices retreated for a second straight day on the news. The price for Brent crude oil moved lower by 0.78 percent to start trading in New York at $45.47 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, was down 0.78 percent to $44.43 per barrel.

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Despite April's rally, crude oil prices are about 30 percent lower than they were this time last year.

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Supply-side concerns emerged in late April when data showed production increases from members of the Organization of Petroleum Exporting Countries. Some of its members had called for a production freeze, though Iranian reservations left any agreement without the support needed for full implementation.

The Iraqi Ministry of Oil said that, even though there was no oil leaving from the Kurdish north of Iraq, oil exports for April were the highest ever at 3.36 million barrels per day.

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