- China manufacturing shrinks, signaling weak demand for crude
- WTI settles below $72 a barrel, extending a two-week loss
According to Bloomberg article published on May 2, 2023, oil fell the most in almost four months as thin trading volumes exacerbated the fallout from gloomy reports about the health of the global economy.
Downbeat data on the US jobs market and Chinese manufacturing sent West Texas Intermediate below $72 a barrel on Tuesday to the lowest close since March 24. The 5.3% drop was the biggest daily percentage decline since Jan. 4. US trading volumes slipped to the lowest since December 2022 Monday amid holidays in Asia and the UK.
“The market is an investor desert,” said Scott Shelton, an energy specialist at ICAP. “The fundamental information that generates predictable price action doesn’t exist.”
Vacancies at US employers fell to an almost two-year low in March, a fresh sign of a softening labor market. Activity in China’s export-tilted manufacturing sector missed estimates in April, a possible hint of a recession among customers in the US and Europe. And Iranian Oil Minister Javad Owji said the country has increased output to more than 3 million barrels a day, providing additional supplies to the market.
Morgan Stanley slashed its forecast for Brent crude prices in the third quarter by $12.50 to $77.50 a barrel, saying Russian supplies remain high enough and that much of the demand boost from China’s reopening has likely already played out.
“It’s going to take some evidence in the physical market on the tightening we see in our balances before we see any more positive or committed trading activity,” Emily Ashford, an energy analyst at Standard Chartered Bank, said by phone.
