Crude oil futures edge lower as traders shrug off upbeat China PMI

Crude oil futures edged lower to trade at the weakest level in four-weeks on Monday, as market players shrugged off the release of upbeat Chinese manufacturing data and continued to focus on receding concerns over a disruption to supplies from the Middle East.

On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD104.33 a barrel during European morning trade, down 0.4%. 

New York-traded oil futures fell by as much as 0.55% earlier in the session to hit a daily low of USD104.15 a barrel, the weakest since August 22. 

The November contract settled down 1.05% at USD104.75 a barrel on Friday.

Oil futures were likely to find support at USD103.56 a barrel, the low from August 22 and resistance at USD108.14 a barrel, the high from September 19.

Stronger-than-expected Chinese manufacturing data released earlier in the session failed to boost oil prices.

China’s HSBC Flash Purchasing Managers Index rose to a six-month high of 51.2 in September from a final reading of 50.1 in August.

The measure remained above the 50.0-mark for the second consecutive month, indicating expansion in manufacturing activity.

China is the world’s second largest oil consumer and manufacturing numbers are used as indicators for fuel demand growth.

Oil prices sustained their downward trend in recent sessions as fears over a disruption to supplies from the Middle East continued to fade away.

Oil prices surged to a 27-month high of USD112.22 a barrel on August 28 amid indications the U.S. was close to taking military action against Syria for its alleged use of chemical weapons against civilians. 

But prices have since lost nearly 6% after the U.S. and Russia reached a diplomatic solution on how to handle Syria’s chemical weapons on September 14.

While Syria is not a major oil producer, investors fear that the two-year-old civil war could spill over to affect oil supplies in nearby countries.

Reports that Libyan oil production is on the rise after protesters reopened access to facilities also added to the selling pressure, as did talk that oil output in Iraq is recovering.

Countries in the Middle East were responsible for nearly 35% of global oil production in 2012.

Uncertainty over the future of the Federal Reserve’s stimulus program also weighed.

Traders reassessed their expectations regarding the duration of the central bank’s bond-buying program after St. Louis Fed President James Bullard said Friday that a small tapering of bond purchases is “possible” at the Fed’s October meeting.

The Federal Reserve’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery shed 0.3% to trade at USD108.91 a barrel, with the spread between the Brent and crude contracts standing at USD4.58 a barrel.