singapore August 1, 2012, 10:54 IST
singapore 08 01, 2012, 11:00 IST
Brent crude slipped toward $104 per barrel on Wednesday after softer official manufacturing data from top energy consumer China chipped away at a fragile market sentiment, while fading hopes for U.S. stimulus measures also weighed on prices.
China's official factory purchasing managers' index dropped to an eight-month low in July, reviving concerns the world's second-biggest economy was losing steam, along with other major Asian exporters Japan, South Korea and Taiwan who reported worsening economic stress on Tuesday.
Brent crude fell 51 cents to $104.41 a barrel by 0440 GMT, recovering from an earlier drop to a near one-week low of $104.06. U.S. crude dipped 24 cents to $87.82 per barrel, up from a low of $87.51 hit earlier in the session.
Oil prices pared some of their early losses after data showed China's HSBC PMI rose to the highest level since February, easing concerns stoked by the official PMI figure that fell short of expectations.
"We may see the market lighten its hold with the China PMI coming in below expectations, but it's not the end of the world, at least this week because, the main focus is still the FOMC and ECB meeting," said Ben Taylor, sales trader at CMC Markets.
Investors are expected to mostly stay on the sidelines as they wait for the outcome of the U.S. Federal Reserve's two-day policy meeting that started on Tuesday and the European Central Bank's meeting on Thursday.
Slowing growth in the United States, the world's top oil consumer, had fired up hopes of stimulus measures from the Federal Reserve late last week, but the chances of this seem lower now after recent supportive data, including higher home prices and improved consumer confidence.
"I'm not expecting much to come out of the Federal Reserve meeting, they will be waiting to see what the ECB does before announcing any new policy action."
"The U.S. economy is getting better, it may not be as quickly as everyone would like but it's growing."
The ECB meeting on Thursday remains a key focal point for the market which will be looking for detailed policy action to stem rising Spanish and Italian bond yields.
"The ECB is in a tight spot now, where they have no choice but to act to revive the economy, lower interest rates just doesn't seem to be working."
Germany's finance ministry on Tuesday reiterated its view that there is no need to grant a banking license to the euro zone's new bailout fund. Such a move could enable the fund to buy large amounts of debt issued by troubled euro zone economies.
U.S. OIL INVENTORIES
U.S. crude oil inventories fell 11.6 million barrels in the week ended July 27, a far bigger drop than expected, as imports fell nearly 800,000 barrels per day (bpd), according to the American Petroleum Institute report on Tuesday.
The U.S. Energy Information Administration's weekly report follows at 10:30 a.m. EDT (1430 GMT) on Wednesday.
Oil prices continue to draw support from tensions between the West and Iran over the Islamic republic's nuclear ambitions and the escalating conflict in Syria.
President Barack Obama announced new U.S. sanctions against foreign banks that help Iran sell its oil on Tuesday, hoping to add pressure on Tehran a day before congressional votes on new sanctions.
(Editing by Himani Sarkar)
