NEW YORK, N.Y. – The price of oil dropped more than two per cent Wednesday after disappointing economic news from the world’s two biggest oil-consuming countries and crude stock increase well above analyst estimates.
U.S. commercial crude oil inventories increased 6.7 million barrels from the previous week, well above the expected build of ~1.0 million barrels. Total crude oil stocks of 395.3 million barrels are well above the upper limit of the average range for this time of year. Total commercial petroleum inventories increased by 12.4 million barrels last week.
Oil fell initially after data from China showed a slowdown in manufacturing growth. The decline steepened when a survey in the U.S. showed companies added the fewest jobs in seven months in April.
The reports call into question the strength of global oil demand.
“This ongoing trend of slowing Chinese economic growth will translate to some additional downward revisions in global oil demand expectations” when OPEC, the International Energy Agency and the U.S. Energy Department issue monthly reports next week, Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said in a note to clients.
An industry group in China released data Wednesday showing that manufacturing grew at a slower pace in April and that export orders had been declining steadily. The federation’s purchasing managers’ index fell to 50.6 in April from 50.9 in March. On a 100-point scale, numbers above 50 indicate an expansion.
Investors got a reading on U.S. manufacturing as the Institute for Supply Management’s monthly report showed the manufacturing sector expanded in April for the fifth consecutive month, but at the lowest rate of the year.