Oil prices slumped by another 3% early on Wednesday, extending the 4% losses from Tuesday after manufacturing data from China disappointed and the U.S. dollar strengthened.
As of 7:27 a.m. EDT on Wednesday, the U.S. benchmark, WTI Crude, had plunged below $68 per barrel, at $67.48, down by 2.89%. WTI crude oil futures sank below $70 a barrel on Tuesday amid concerns about opposition to the U.S debt ceiling deal.
The international benchmark, Brent Crude, was down by 2.64% early on Wednesday at $71.61.
WTI and Brent were on track to post a seventh month of monthly declines of more than 9% and 11%, respectively.
While the debt limit deal late on Tuesday cleared its first hurdle at the Rules Committee, which considered the terms by which the legislation would be debated and voted on by the full House, fresh macroeconomic data out of China early on Wednesday weighed on market sentiment again.
China’s purchasing managers’ index (PMI) dropped in May to a five-month
low of 48.8, pointing to a sharper-than-expected contraction in factory activity. Manufacturing activity was below estimates for a second consecutive month, raising again concerns about oil demand in the world’s top crude importer.
Market participants are also on edge ahead of a key OPEC+ meeting this weekend, at which the top producers of the alliance, Saudi Arabia and Russia, are heading with contrasting views on output policy.
“Lower prices ahead of the OPEC+ weekend meeting may raise the temperature in the room with Russia continuing to pump while key Middle East producers have shown constraint,” Saxo Bank’s analysts said on Wednesday.
“The front month spreads of Brent and WTI both trades in contango, a sign of ample supply.”
ING strategists Warren Patterson and Ewa Manthey said on Wednesday, “Market reports of divergent views from Russia and Saudi Arabia on oil supply requirements weighed on the sentiment yesterday as the probability of the OPEC+ meeting concluding without any production cut increases rose.”