Reuters reported that China’s manufacturing activity slowed further last month, with the country’s statistics bureau reporting that the PMI index fell to 49.5, the lowest in five months.
However, Reuters separately reported that the private PMI figure calculated by S&P Global showed an increase in manufacturing activity among small and medium-sized enterprises, which it attributed to strong orders from overseas.
Moreover, analysts at the Economist Intelligence Unit told Reuters that official data suggesting an economic slowdown may not be accurate.
“Actual industrial activity should be stronger than the data suggests as the official PMI is likely not fully capturing the current momentum of exports, the main economic driver this year,” EIU chief economist Xu Tianjin told Reuters.
Meanwhile, crude oil prices started the month higher on expectations of robust peak season demand and tighter supplies due to the latest extension of OPEC+ production cuts.
The price increase comes on the heels of a report from the U.S. Energy Information Administration revealing that oil production and demand jumped to four-month highs in April, with demand specifically increasing to 20 million barrels per day.
A slowdown in Chinese factory activity may dampen some of that enthusiasm, but the impact may not be long-lasting given demand figures. However, news that China’s crude oil imports in the first half of this year fell by 300,000 barrels per day from the first half of 2023 could exacerbate any potential bearish effect.
While the decline is seen as a natural trend following a record rise in imports last year, news of a drop in China’s oil consumption tends to weigh on international prices even when bullish factors are present.
Positive factors this week include concerns about escalating tensions in the Middle East and a shift in European politics following the victory of the right-wing National Coalition party in the first round of general elections on Sunday, according to exit polls.
By Irina Slav of Oilprice.com
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