Baghdad (IraqiNews.com) Crude oil prices fell on Monday after U.S. unions called a refinery strike and activity in China’s factory sector shrank for the second month in a row, quashing Friday’s bullish mood.
At 0938 GMT (4.38 a.m. ET) Brent crude oil futures were down $1.05 at $51.94 a barrel while U.S. crude futures were down $1.13 at $47.11 a barrel.
The move down followed a rally on Friday fueled by month-end short covering and a record weekly drop in the number of U.S. oil rigs employed, according to Baker Hughes.
The count is now down 24 percent from its October peak.
Both contracts rose by about 8 percent and Brent closed at $52.99 a barrel on Friday.
But on Sunday workers at nine U.S. refineries and chemical plants went on strike in a bid to pressure oil companies to agree to a new national contract.
“So far only a handful of refineries have been affected, but the last time they went on strike like this, in 1980, it lasted for three months,” said Ole Hansen, senior commodity strategist at Saxo Bank.
Last week US Crude inventories hit a record high, and any dampening of refinery demand would likely push stocks higher as the slowdown in drilling has still not impacted U.S. production, analysts said. [EIA/S]
“The market is likely too excited about falling rig counts,” analysts at Morgan Stanley said in a note on Monday. “(It) fails to appreciate that the relationship between rig count and production can be deceptive. The most productive rigs will likely remain as long as possible.”
Monday’s more bearish mood was cemented by data showing weaker manufacturing demand in China. The final HSBC/Markit Purchasing Managers’ Index (PMI) for January came in at 49.7 on a seasonally adjusted basis, just below the 50.0 level that separates growth from contraction.
Oil prices have been under pressure for months because of abundant supplies and weaker-than-expected demand growth in Europe and Asia. OPEC’s decision in November not to cut output, but rather to allow prices to balance the market by driving out higher cost production, has contributed to the sell off.
Saudi Arabia is expected to cut prices for most of the crude it sells to Asia in March in line with a weak Dubai market, trade sources said on Friday.
“With no change of stance by Saudi it seems highly probable that prices will fall back below $50 soon,” Christopher Bellew, a broker at Jefferies Bache in London, said. /End/