LONDON (Reuters) - Oil fell on Thursday to a one-week low near $104 a barrel, pressured by a survey pointing to a slowing Chinese economy and the U.S. Federal Reserve’s plan to roll back its stimulus programme.
Commodities and equities fell after the survey of Chinese manufacturing activity in June, which heightened the risk of a sharper slowdown this quarter in the world’s second-largest oil consumer.
Brent crude was down $1.80 to $104.32 a barrel by 0840 GMT, while U.S. oil declined $1.89 to $96.35. Brent traded as low as $104.02, the lowest intra-day price since June 13.
“There are a few factors weighing on oil today. The Federal Reserve has confirmed that they are likely to taper down asset purchases,” said Lee Chen Hoay, an investment analyst at Phillip Futures. “China’s latest PMI data is pointing to a slowdown in demand. As the world’s second-largest oil consumer, any slowdown in demand will weigh on prices.”
Oil was already under pressure after Fed Chairman Ben Bernanke said on Wednesday the U.S. economy was expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year.
Prices also took a hit from a surprise increase in U.S. crude inventories, despite the summer driving season when demand rises being under way. Stocks rose by over 300,000 barrels, in contrast to the 500,000-barrel drop analysts forecast.
Oil may not fall much further from current levels due to concerns about a disruption in supplies from the Middle East, home to a about third of the world’s output.
Investors have been worried about an escalation in violence in Syria and a spillover to neighbouring countries. The United States said it plans to send U.S. weapons to Syrian rebels following proof the Syrian government had used chemical weapons against opposition forces.
Reporting Alex Lawler and Manash Goswami; Editing by Jason Neely