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Oil prices fell today as China’s factory sector performance declined sharply in January to a level indicating contraction in business activity, which clouded future oil demand.

According to Reuters, Brent crude dropped by 17 cents to $108.10 a barrel, while US crude slipped 25 cents to $96.48 a barrel.

Crude value dropped after flash results of a survey by Markit Economics and HSBC revealed on Thursday that purchasing managers’ index fell to a six-month low of 49.6 in January from 50.5 in December.

An index reading above 50 indicates expansion of the sector while a reading below 50 suggests contraction.

The manufacturing output index reached a three-month low of 51.3 in January from 51.4 in December.

"According to Reuters, Brent crude dropped by 17 cents to $108.10 a barrel, while US crude slipped 25 cents to $96.48 a barrel."

New orders decreased in January after an expansion in December and new export orders fell for a second consecutive month and at a faster pace than in December.

The prices also fell after the US American Petroleum Institute (API) data revealed that the crude inventories rose by 4.9 million barrels in the week to 17 January, to 355.7 million.

But distillate stockpiles, which include diesel and heating oil, fell by 2.3 million barrels.

Oil traders are now waiting for the US Energy Information Administration (EIA) data on oil stockpiles, which is scheduled late today to gauge the demand outlook in the world’s top oil consuming country.

Oil futures surge after TransCanada began transporting crude through a major new pipeline from Oklahoma to the Gulf Coast, expected to help eliminate a bottleneck that has impacted the US oil market for three years.


Image: China’s factory sector activities contracted in January for the first time in six months. Photo: courtesy of Rawich.

Energy