Crude oil futures dip amid weak Chinese data, release of state reserves

Crude oil futures dipped in mid-morning trade in Asia Nov. 1 following weak economic data out of China and Beijing's announcement that it would release state oil product reserves to the domestic market.

At 11:01 am Singapore time (0301 GMT), the ICE January Brent futures contract was down 23 cents/b (0.27%) from the previous close at $83.49/b, while the NYMEX December light sweet crude contract fell 41 cents/b (0.49%) at $83.16/b.

"Oil markets got off to a rocky start after weak weekend official China PMI releases," said OANDA senior market analyst Jeffrey Halley.

China's manufacturing PMI fell to 49.2 in October from 49.6 in September -- its second straight month of decline, data from the National Bureau of Statistics showed Oct. 31. Any number below 50 indicates a contraction of activity.

IG market strategist Yeap Jun Rong said the figures underscored the fragility of the global economic recovery underway.

"PMI figures out of China over the weekend continue to highlight the weakness in economic conditions. A confluence of risk factors continues to be reflected on the Chinese economy, such as the global supply chain shortages and ongoing

energy crisis," Yeap said.

China's National Food and Strategic Reserves Administration said Oct. 31. that it will release state oil product reserves to the domestic market to offset a supply shortage and stabilize prices in certain regions. The announcement shows the government's efforts to ensure domestic supplies and to control inflation by capping energy prices. It did not announce the volume to be released or targeted regions.

Latest Commitments of Traders data from the US Commodity Futures Trading Commission showed investors have turned sour on the outlook for oil prices, with speculative net longs in the NYMEX oil contract posting its first decline in four weeks as of Oct. 26. Speculative net longs in the NYMEX contract fell by 5,992 lots to 340,844 in the week to Oct. 26, CFTC data showed.

OANDA's Halley said oil prices will struggle to trade higher this week amid a slew of key dates and economic releases, including an OPEC+ meeting on Nov. 4 and a meeting of the US Federal Reserve's Open Market Committee on Nov. 3.

"With a cast of thousands of data releases on the calendar this week, including an FOMC decision, oil will struggle to make and maintain new highs. The OPEC+ meeting presents some tail risks as well on the 4th. The group is unlikely to

change its production increase schedule, but they have surprised before," he said.

"One way or another, crude's rally is over. The downward pressure is piling up. And the upward pressure from coal and gas shortages is starting to ease, even if only gradually," said Vandana Hari, CEO of Vanda Insights.