Crude oil prices experienced a decline on Wednesday after data showed industrial activity in some of the world’s major crude-consuming nations has softened.
Traders said oil prices declined on concerns of a slowdown in the global economy after three out of the world’s top consumers of crude- China, India and Japan – reported a slowdown in monthly factory activity.
China, the world’s largest importer of oil, reported on Wednesday that growth in factory activity in February was at its lowest since July 2016.
While China’s week-long Lunar New Year holiday this month disrupted business activity, traders also pointed to tougher pollution rules which has curtailed factory output.
“This morning, we’ve had weak Chinese PMI numbers and one can say it’s the influence of the Lunar New Year, but holidays are expected and this number is below expectations,” Petromatrix strategist, Olivier Jakob said.
May Brent crude futures were up 5 cents at $66.57 a barrel by 1005 GMT, while the front-month April contract, which expires on Wednesday, was also up 5 cents at $66.68 a barrel. U.S. West Texas Intermediate crude was down 5 cents at $62.96 a barrel.
In Japan, the world’s third-largest economy, industrial output in January took its biggest tumble since a devastating earthquake in March 2011, highlighting a weakening in demand and a build-up of inventory.
Growth in India’s factory activity slowed as well to a four-month low in February as new orders eased and weighed on output, after manufacturers raised prices at the fastest pace in a year, a business survey showed on Wednesday.
In the United States, the world’s biggest oil consumer, rising crude stockpiles and a drop in refinery runs weighed on prices.
Official weekly data from the U.S. Energy Information Administration (EIA) is due out later on Wednesday.
Soaring U.S. production has prevented oil prices from rising much above $70 a barrel this year, even though the Organization of the Petroleum Exporting Countries (OPEC) and Russia have reduced output.
“Climbing U.S. production continues to weigh on the market as traders fear that the OPEC output cuts will be nullified by the rising U.S. output,” said William O‘Loughlin, investment analyst at Australia’s Rivkin Securities.
U.S. crude oil production has risen by a fifth since mid-2016 to more than 10 million bpd.
The EIA will also release its monthly report on energy supply, which analysts expect to show another large upward revision to U.S. crude output figures.
“Last month, the revisions were a big contributor in the weakness that we saw in early February so … trading is going to be trickier than usual,” Petromatrix’s Jakob said.