Prices Just Above Tuesday’s Lows As China Demand Outlook Deteriorates

Oil prices sank by over 4% on Tuesday and those losses have been slightly extended during the APAC session as markets remain risk averse in the face of disappointing May China PMI data. Crude markets have struggled in the face of China’s disappointing recovery and today’s PMIs confirmed that sentiment. Oil prices are down around 0.3% today while the USD index is up is 0.2%.

• Brent is trading around $73.50/bbl, off the intraday low of $73.41. WTI has held above $69 with a low of $69.15 and is currently trading at about $69.25.
• The China composite PMI in May eased to 52.9 from 54.4 with manufacturing falling further below the breakeven-50 level at 48.8. China is the world’s largest importer of crude and so this was not good news for markets.
• Market indicators are pointing to ample near-term physical supply. Later API US inventory data are published. Bloomberg cited Wood Mackenzie data showing that crude stocks at Cushing rose 1.05mn barrels in the latest week indicating softer demand.
• Later the Fed publishes its Beige Book and Collins, Bowman, Harker and Jefferson all speak. In terms of data, there are the May Chicago PMI and April JOLTS job openings released. The EU Financial Stability Review is due and ECB President Lagarde will speak.