Weak Chinese Manufacturing Data Pressures Crude Oil after Early Rise

Crude oil futures dipped slightly on Wednesday after the market retreated from earlier gains, following the release of a bearish Chinese manufacturing report.

Prices crept up in early Asian trading, buoyed by a friendly American Petroleum Institute report that showed U.S. stockpiles fell more than expected. According to the API, stockpiles fell 3.7 million barrels the week-ending September 18, 2015. Traders were looking for a drawdown of 2.1 million barrels. The major hub at Cushing, Oklahoma was down almost 500,000 barrels.

The early rally didn’t last very long due to the weaker-than-expected Caixin China Manufacturing Purchasing Managers’ Index (PMI) report showed a decline to 47.0 in September. Traders were looking for a reading of 47.5. The report came in at 47.3 in August. This was the seventh straight monthly decline and the worst reading since March 2009. A reading below 50 indicates a contraction.

November Crude Oil futures are currently trading on its low for the session at $46.12, down 0.47%. Brent futures are down 26 cents at $48.82 per barrel.

On Tuesday, Brent futures settled higher while U.S. futures finished down about 2 percent, but off its low in reaction to a partial pipeline outage. The rebound rally was triggered by the news that Colonial Pipeline had shut part of its operation including a line with an 850,000 barrels capacity to carry both gasoline and distillates from North Carolina to its New Jersey hub. November Gasoline futures closed higher on the news.

On Wednesday, traders will get a chance to react to the latest U.S. Energy Information Administration’s weekly inventory report. Analysts surveyed are estimating that crude oil stockpiles fell by 1.0 million barrels during the week-ended September 18. Crude oil stockpiles are expected to rise.