Oil slips as weak economic data fuels demand concerns

Brent’s price has come under some downward pressure as manufacturing activity in the world's top oil consumer, the US, contracted in December, signalling slower demand.

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The Manufacturing Purchasing Managers' Index (PMI) reading in the US, the world's largest oil consumer, came in at 47.9% in December, down from November’s 48.2%, the Institute for Supply Management (ISM) reported.

The latest data pointed to weaker industrial activity in the US, heightening concerns over demand growth.

A PMI reading below 50 signals contraction in manufacturing activity — a key indicator of economic health that reflects slowdown in production and new orders, as well as lower inventory levels.

Analysts note that sustained weakness in US manufacturing could prompt the Federal Reserve (Fed) to consider interest rate cuts to stimulate borrowing, investment and spending.

Lower rates typically boost demand by making dollar-denominated commodities like oil more affordable for holders of other currencies, potentially offering some upside support to prices.

By Aparupa Mazumder

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