Oil Prices Slump in Asia as Chinese Manufacturing Index Declines

TEMPO.CO, Jakarta - Oil prices across Asia went down at the end of Monday's trading session after China posted a weak manufacturing index, which means that the demand for energy at one of the world's largest energy consumer is declining, say analysts. 

June contracts for the US benchmark—the light sweet crude oil or the West Texas Intermediate (WTI)—dropped by two cents to end trading at US$59,13 per barrel, while the European benchmark—the Brent North Sea Oil—similarly dipped by seven cents to conclude trading at US$66,39 per barrel. 

Analysts are saying the dip in prices is the market's reaction to the recent figures released by HSBC, which show that China's manufacturing output has dropped to a 12-month low in April 2015.

The banking giant survey stated that China's purchasing manager index (PMI) for the month of April stood at 48.9—down from the March figure at 49.6 and was almost as low as when the figure dipped to its lowest point at 48.1 in April 2014.

The index, which is brought together by Markit, traces the activity of factories and workshops across the country to come up with the figure—wherein a figure above 50 means that the economy is growing, and anything less than 50 means that the economy in question is experiencing a contraction.

"The bleak PMi figure shows that China's economic fundamentals are not as healthy as previously thought—as relfected by the dampened momentum," said an expert of Chinese economy for Capital Economics, Julian Evans-Pritchard.

That said, Sanjeev Gupta, a leading oil-and-gas analyst for Asia-Pacific for Ernst and Young, said that oil prices were currently being affected by the worsening geopolitical situation in Yemen, wherein a Saudi-led military coalition is mounting an assault to eradicate the ethnic insurgency in Yemen.

It is known that Saudi Arabia has deployed several units to fight insurgents in Aden, Yemen on Sunday, according to Yemeni sources—the first on-ground deployment by a foreign power in the restive nation since rebel forces effectively seized the capitalof Yemen, Sanaa, in February.

Although Yemen is not one of the world's main oil producers, its coastline forms an important land boundary of the Bab el-Mandeb Strait—a strategic entry point to the Red Sea, wherein around 4.7 million barrels pass through the area either towards or away from the Suez Canal—according to AFP reports.

ANTARA