Oil slides on grim manufacturing data

Markets are also looking for hints on the outlook for interest rates

By Reuters

Published: Wed 23 Aug 2023, 3:40 PM

Oil prices slid more than 1 per cent on Wednesday as gloomy global manufacturing data grabbed attention ahead of an annual meeting of central bankers at Jackson Hole in the United States, with interest rates high on the agenda.

Brent crude was down $1.01, or 1.2 per cent, at $83.02 a barrel by 1027 GMT while US West Texas Intermediate crude was down 98 cents, or 1.2 per cent, at $78.66. Both benchmarks fell by more than $1 earlier in the session.

Manufacturing data emanating from a host of purchasing managers’ index (PMI) surveys on Wednesday gave a steer on the health of economies across the globe.

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Results so far have been grim. Japan reported shrinking factory activity for a third straight month in August. Euro zone business activity also declined more than expected, particularly in Germany. Britain’s economy, meanwhile, looks set to shrink in the current quarter and is in danger of falling into recession.

US PMI data is expected later on Wednesday.

“What oil watchers should be concerned with is that all of the predictions of manufacturing PMIs are under 50 ... all in contraction territory,” said John Evans of oil broker PVM.

“Readings below expectations will sound warnings again of lower oil demand.”

Markets are also looking for hints on the outlook for interest rates when Federal Reserve officials and policymakers from the European Central Bank (ECB), the Bank of England and the Bank of Japan head to Jackson Hole, Wyoming, on Thursday.

Crude stocks in the United States continued to fall, dropping by about 2.4 million barrels in the week ended Aug. 18, according to market sources citing American Petroleum Institute figures on Tuesday. That was a slightly smaller draw than the 2.9 million barrel drop expected by analysts in a Reuters poll.

The weekly report from the Energy Information Administration, the statistical arm of the US energy department, is due at 1430 GMT on Wednesday.