US and China economic data weigh on oil market sentiment

Brent futures felt some downward pressure as manufacturing activity in the world's top oil consumers, China and the US, slowed for the third consecutive month in July.

PHOTO: Flags of China and the US. Getty Images

The Manufacturing Purchasing Managers' Index (PMI) reading in the US dipped from 48.5% in June to 46.8% in July, indicating a decline in the country’s manufacturing sector, the US Institute for Supply Management (ISM) reported.

“Economic activity in the manufacturing sector contracted in July for the 20th time in the last 21 months,” the ISM stated.

China's manufacturing PMI fell slightly from 49.5% in June to 49.4% in July, data from China’s National Bureau of Statistics (NBS) showed. The latest reading shows that factory activity in China has shrunk for a third consecutive month, market intelligence provider JLC said.

The drop in China’s manufacturing PMI was largely due to “insufficient market demand,” JLC reported citing Zhao Qinghe, a senior statistician at the NBS.

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.

“Data showing US manufacturing activity slumping to an eight-month low and the employment index declining sharply in July rattled [oil] investors on Thursday,” VANDA Insights’ founder and analyst Vandana Hari said.

By Aparupa Mazumder 

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