SINGAPORE, Apr 29: Brent crude dropped below $103 a barrel on Monday as investors fretted about the uncertain outlook for growth in the world’s two largest oil consumers, the United States and China.
The crude benchmark remains more than 6 percent below its starting point in April, hurt by a slew of economic indicators in recent weeks suggesting the global economy remains on a fragile footing at best.
Data on Friday showing the United States grew at a slower-than-expected pace in the first quarter muddied the outlook further, weighing on oil, base metals and the dollar.
Brent crude slipped 41 cents to $102.75 a barrel by 0630 GMT, after racking up its biggest weekly gain since November. U.S. Oil was down 27 cents at $92.73 a barrel.
‘First-quarter GDP really disappointed, and as long as unemployment stays high, the U.S. Federal Reserve is going to have to keep its backstop on the economy with quantitative easing,’ said Ben Taylor, sales trader at Sydney-based CMC Markets.
‘Investors this quarter will be looking for a stronger PMI number, improved consumer confidence and improved consumer spending to feel confident about where the U.S. economy is headed.’
The Fed is expected to keep its current pace of bond buying at $85 billion a month when it meets this week, given the recent spate of weak numbers and a bleak outlook.
The Institute of Supply Management’s April manufacturing survey is forecast to dip to 51.0 from 51.3 in March, while the U.S. Economy is likely to have generated 150,000 jobs in April, up from just 88,000 in March but not enough to reduce the jobless rate from 7.6 percent.
CHINA EYED
Traders will also be zeroing in on China this week, with the world’s second largest oil consumer’s manufacturing data for April expected to edge up from March, a Reuters poll found.
A private sector survey of purchasing managers sponsored by HSBC last week showed activity in China’s industrial sector contracted in April as new exports shrank, spooking investors.
‘There has been some concern that with an unstable Europe being one of China’s biggest export market, this could have a negative impact on the PMI number,’ Taylor said.
‘Europe is in a really bad place at the moment, you get the sense that everyone has really given up on it and is focusing on other places to drive global growth.’
The European Central Bank will likely cut interest rates when it meets on Thursday, a Reuters poll showed, but the step is seen doing little to pull the euro zone out of a recession.
‘Market direction will be driven by heavy data flow this week, with the official China manufacturing PMI for April, ECB and FOMC meetings, US ISM and Non-farm payrolls all to be closely watched,’ analysts at ANZ Bank said in a note.
Brent is expected to retest support at $102.06 per barrel, with a good chance of breaking this level and falling more to $101.43, while U.S. Oil is expected to drop to $91.71, as it did not break a resistance at $93.14, according to Reuters technical analyst Wang Tao. (AGENCIES)
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