SINGAPORE – Oil fell about 1 percent on Monday after posting its first monthly rise since June, pressured by continued weakness in China’s vast manufacturing sector and higher Libyan crude output.
The Chinese central bank cut benchmark lending and deposit rates a day before it released official data that showed a second consecutive month of shrinking manufacturing activity for February.
“While the Chinese New Year is impacting the numbers, the second consecutive sub-50 reading for the Chinese manufacturing PMI suggests all is not well,” analysts at ANZ said in a report.
The bank expects Beijing to lower the country’s growth target to 7 percent this year in the upcoming National People’s Congress, down from 7.5 percent last year. Slower economic growth curbs oil demand at the world’s largest energy consumer.
Brent crude was down 52 cents at $62.06 a barrel by 0044 GMT after posting an 18-percent gain in February, the largest monthly rise since May 2009. U.S. crude futures dropped 49 cents to $49.27 a barrel after rising 3 percent in February.
Supply disruption among members of the Organization of the Petroleum Exporting Countries (OPEC) in February supported global benchmark Brent, stretching its premium over U.S. crude to the widest since January 2014 on Friday at $13 a barrel.
The spread narrowed on Monday following a recovery in Libya’s oil production to more than 400,000 barrels per day (bpd).
Iraq’s Oil Minister Adel Abdel Mehdi said on Sunday world oil prices were gradually rebounding and he expected to see a barrel of crude selling at around $65.
“I don’t think they will return to their previous levels. I can see that oil will be sold at $64 to $65 a barrel,” he told a news conference in Baghdad.