Oil prices dip as Chinese demand growth remains weak

The front-month ICE Brent contract shed $0.21/bbl to settle at $71.77/bbl on Monday after China's manufacturing activity in September fell short of expectations.

PHOTO: An oil pump jack photographed at dusk, with the Chinese flag in the background. Getty Images

Manufacturing Purchasing Managers' Index (PMI) reading in China, the world's second-largest oil consumer, reached 49.8% in September, slightly up from 49.1% in August, the country's National Bureau of Statistics (NBS) reported.

China’s factory activity showed slight improvement from last month, but market analysts expected a better outcome. This news comes amid concerns that Beijing's latest economic stimulus measures may not be enough to sustain economic growth in the country.

“Whether the [Chinese economic] recovery will be a one-off adrenaline boost or a more sustained path, that will be a question for later,” IG Group’s market strategist Yeap Jun Rong said, adding that the latest manufacturing PMI numbers reflected a “still-soft” demand outlook from China.

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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