Oil falls 2pc on fad­ing prospect of OPEC ac­tion

The Pak Banker - - MARKETS/SPORTS -

Oil fell 2 per­cent on Mon­day as weak eco­nomic data from China, the world's largest en­ergy con­sumer, weighed on prices and an OPEC source played down talk of an emer­gency meet­ing to stem the de­cline.

China's man­u­fac­tur­ing sec­tor con­tracted at the fastest pace since 2012 in Jan­uary, adding to wor­ries about de­mand from the world's se­cond-big­gest econ­omy at a time when the mar­ket is al­ready weighed down by a large sup­ply over­hang.

"The weak China PMI (pur­chas­ing man­agers' in­dex) is driv­ing down prices be­cause China weighs on the en­tire com­modi­ties sec­tor from the de­mand side of the equa­tion," said Carsten Fritsch, se­nior oil an­a­lyst at Com­merzbank in Frank­furt.

Brent April crude fu­tures LCOc1 were down 1.8 per­cent, or 64 cents, at $35.35 a bar­rel at 0905 GMT. The March Brent con­tract, which ex­pired on Fri­day, set­tled at $34.74 a bar­rel.

U.S. West Texas In­ter­me­di­ate (WTI) CLc1 was down 2 per­cent, or 68 cents, at $32.94 a bar­rel.

A se­nior OPEC source told a Saudi Ara­bian news­pa­per it was too early to talk about an emer­gency meet­ing of the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries.

Oil prices jumped last week af­ter Rus­sian en­ergy of­fi­cials said they had re­ceived pro­pos­als from OPEC lynch­pin Saudi Ara­bia on man­ag­ing out­put and were ready to talk.

"We do not ex­pect such a cut will oc­cur un­less global growth weak­ens sharply from cur­rent lev­els, which is not our econ­o­mists' fore­cast," in­vest­ment bank Gold­man Sachs said in a re­port.

OPEC mem­ber Iran, which last month was al­lowed to re­turn fully to mar­kets af­ter years of sanc­tions, is so far un­will­ing to par­tic­i­pate in cuts. Partly be­cause of Iran's re­turn, OPEC pro­duc­tion has jumped to 32.60 mil­lion bar­rels per day (bpd), its high­est in years, adding to a global glut of over 1 mil­lion bpd in ex­cess of de­mand, which has pulled down oil prices 70 per­cent since mid-2014.

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