Brent crude fell from the highest closing price in three days as a measure of China’s manufacturing missed estimates and the U.S. pledged to continue operations to stop Islamic radicals in Iraq. West Texas Intermediate also dropped.
Futures declined as much as 0.8% in London. A preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics slid to 50.3 for August. A median 51.5 was projected in a Bloomberg News survey. President Barack Obama said the beheading of an American journalist by Islamic State militants won’t deter him from a bombing campaign aimed at halting their advances.
“The softer China PMI might be one of the key news drivers today,” Torbjoern Kjus, an analyst at DNB ASA in Oslo, said by phone. “That’s more affecting the financial players.”
Brent for October settlement decreased as much as 80 cents to $101.48 a barrel on the London-based ICE Futures Europe exchange and was at $101.57 at 9.36am local time. The contract rose 72 cents to $102.28 yesterday. The volume of all futures traded was about 22% below the 100-day average for the time of day. Prices are down 8.3 percent this year.
WTI for October delivery fell as much as 95 cents, or 1%, to $92.50 a barrel in electronic trading on the New York Mercantile Exchange. The US benchmark crude was at a discount of $8.85 to Brent. The spread closed at $8.83 yesterday, the widest since June 19.
The Chinese manufacturing gauge trailed all 22 forecasts in the Bloomberg survey of economists. It’s down from a final reading of 51.7 for July and, if confirmed on Sept. 1, will be the lowest in three months. Numbers above 50 signal expansion.
China will account for about 11% of global oil demand this year, compared with 21% for the US, according to the Paris-based International Energy Agency.
“Power production in the first part of August was very weak, and steel production was the same,” Wang Tao, the head of China economic research at UBS AG, said in an interview with Bloomberg Television in Hong Kong. “The economic recovery’s momentum has slowed.”
In Iraq, American warplanes struck Islamic State vehicles and equipment near Mosul, the US Central Command said yesterday. The Obama administration is considering sending about 300 additional troops to augment security at its embassy in Baghdad, according to the Pentagon.
The conflict in Iraq, the second-biggest producer in the Organization of Petroleum Exporting Countries, has largely spared the south, home to about three-quarters of its crude output. The nation pumped 3 million barrels a day last month, a Bloomberg survey of producers and analysts shows.
Brent has technical support along its lower Bollinger Band, according to data compiled by Bloomberg. Futures halted an intraday drop yesterday near this indicator, at about $101.25 a barrel today. Buy orders tend to be clustered around chart- support levels.
US crude stockpiles shrank by 4.47 million barrels through Aug. 15, the most in five weeks, the Energy Information Administration reported yesterday. Gasoline inventories increased by 585,000 barrels while distillate supplies, including heating oil and diesel, declined by 960,000 barrels, said the Energy Department’s statistical arm.
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