Crude oil futures tick lower on uninspiring Chinese PMI data, pandemic concerns

Singapore — 0323 GMT: Crude oil futures ticked lower during mid-morning trade in Asia April 30, as prices pulled back from a six-week high due to weaker economic data from China, and persistent concerns over the progress of the pandemic in key economies around the world.

At 11:23 am Singapore time (0323 GMT), the ICE Brent June contract was down 32 cents/b (0.47%) from the April 29 settle at $68.24/b, while the June NYMEX light sweet crude contract was down 36 cents/b (0.55%) at $64.65/b.

The downturn in the market comes after oil prices had hit a six-week high on April 29, with front month ICE Brent and NYMEX light sweet crude contracts settling at $68.56/b and $65.01/b, respectively.

The rise in prices on April 29 was driven by signs of improving oil demand in China, Europe and the US. Optimism over the US economic recovery also provided some tailwind to the market, as the country had posted an annualized growth rate of 6.4% in Q1 2021, according to April 29 data from the Commerce Department.

This morning, however, prices came under pressure due to profit-taking activity, and weaker-than-expected Chinese Purchasing Managers' Index. Data from the National Bureau of Statistics released April 30 showed that the recovery in China's manufacturing and services sectors had slowed slightly, with manufacturing PMI at 51.1 in April from 51.9 in March, and non-manufacturing PMI at 54.9 in April from 56.3 in March.

"A weaker-than-expected Chinese manufacturing PMI weighed on sentiment," Margaret Yang, DailyFX strategist told S&P Global Platts April 30.

Yang also cited the resurgence of the pandemic in key economies, especially India, as a reason for the caution shown by investors this morning. The country reported a record 379,308 new cases and 3,645 deaths on April 28, latest data from John Hopkins University showed.

"Viral resurgence in India appears to be a key concern among Asia-Pacific investors, dampening the prospect of energy demand from the world's third-largest oil importer," she said.

Other analysts have also said that increased mobility restrictions in India have suppressed downstream oil products demand in the country, with refiners looking to export fuel to prevent domestic inventories from burgeoning.

Concerns over the deterioration of the pandemic situation in other countries, such as Japan and Brazil, has also soured sentiment in the market, with ANZ analysts saying in a April 30 note that "demand in [these two countries] is also likely to be hit by a surge in infections and new restrictions."