Oil plunges following latest economic data

Brent’s price moved lower in the past session as manufacturing activity in the two top oil consumers of the world – the US and China – contracted in April.

IMAGE: Flags of the US and China. Getty Images

The Manufacturing Purchasing Managers' Index (PMI) reading in the US, the world's largest oil consumer, came in at 48.7% in April, down from March's 49%, the Institute for Supply Management (ISM) reported.

In China, manufacturing PMI came in at 49% in April, declining from the previous month's 50.5% growth, Trading Economics reported citing the country’s National Bureau of Statistics (NBS).

The news comes against the backdrop of mounting concerns over the ongoing Sino-US tariff saga. “When Trump’s 145% tariff hammer finally made contact, China’s factory engine sputtered,” SPI Asset Management managing partner Stephen Innes remarked.

Adding to the uncertainty, the manufacturing PMI points to a slowdown in the manufacturing sectors of both countries, raising fears of weaker demand for key commodities like oil.

“China's manufacturing PMI fell to a 16-month low in April as the impact of tariffs started hitting producers,” ING Bank’s chief economist for the greater China region Lynn Song said.

A PMI reading below 50 typically indicates weak economic health and a contraction in the manufacturing sector, which includes production, inventory levels, new orders, etc. It also highlights demand growth concerns, ultimately weighing down on prices of commodities like oil.

By Aparupa Mazumder

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