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China's giant manufacturing sector is shrinking, economists say,
as domestic demand falters, fanning concern that the economy may
be slowing more sharply than feared.
Stock markets skidded to 3-1/2-year lows and the dollar sagged,
pulled down by the weak Chinese data.
But the outlook for the U.S. economy looks brighter and oil
supply there seems to be tightening, with one report estimating
a drawdown of over 1 million barrels last week from the Cushing,
Oklahoma delivery hub for U.S. crude.
Brent crude oil was up 65 cents at $47.99 a barrel by 1200 GMT
after dropping 2.5 percent on Monday. U.S. light crude oil was
also up 65 cents, at $45.08.
Oil prices have stabilized over the last month after more than a
year of dramatic falls and rallies that have seen benchmark
Brent swing between a high above $115 a barrel in June 2014 to a
low of almost $42 in August this year.
Underlying the collapse in prices is a huge oversupply as Middle
East oil producers have fought for market share with U.S. shale
producers, increasing stockpiles worldwide.
Global commodity prices have slumped, squeezing income for
producers of key raw materials and triggering a sector-wide
crisis. Shares in commodity trading firms, such as Glencore and
Noble, have been hit hard.
"Growth concerns for China and the close to 30 percent drop in
Glencore shares have helped to drive bearish sentiment," said
Bjarne Schieldrop, chief commodities analyst at SEB Markets.
Oil traders awaited official figures from the U.S. government on
Wednesday on supply and demand in the United States, the biggest
domestic oil market.
Market intelligence firm Genscape estimates stocks at the
Oklahoma delivery hub for U.S. crude fell by more than 1 million
barrels last week, traders who saw the figures said.
Lower oil prices may have begun to reduce production in the
United States, but the world still faces an oil glut.
"U.S. output showing firm signs of slowing," Rhidoy Rashid, oil
analyst at consultancy Energy Aspects told Reuters Global Oil
Forum. "Prices must hold at this range for around the coming six
months for rebalancing to occur properly."
(Additional reporting by Henning Gloystein in Singapore; Editing
by Mark Heinrich and Susan Thomas)
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