Oil prices weaken further

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Oil extended its losses in Asian trade on Thursday on weak Chinese manufacturing data and a stronger dollar, analysts said.

New York’s main contract, West Texas Intermediate light sweet crude for delivery in July, dropped 63 cents to $93.65 a barrel in the afternoon and Brent North Sea crude for July delivery shed 60 cents to $102.00.

“Oil is on the downside with the Chinese PMI (purchasing managers’ index) data… people were expecting that it would be soft but not to the extent of a contraction,” Kelly Teoh, market strategist at IG Markets in Singapore, told AFP.

Banking giant HSBC said preliminary data showed manufacturing activity in China slowed in May for the first time in seven months, in another sign of the weakness of recovery in the world’s second-largest economy.

Its initial PMI for the month came in at 49.6, from a final 50.4 in April. A reading above 50 indicates growth and anything below points to contraction. The final result will be announced on June 3.

Separately, a strong dollar is also weighing on crude prices, analysts said.

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“Oil prices are being kept down after the US dollar strengthened,” Ric Spooner, chief market analyst at CMC Markets in Sydney, told AFP.

A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies. In turn, that tends to weigh on oil demand and prices.

The dollar held firm against other major currencies Thursday after Federal Reserve chief Ben Bernanke suggested a day earlier that the Fed could taper its massive stimulus in the coming months.

But he said any tapering off could only happen once it had confidence that economic gains could be sustained, warning that a “premature tightening of monetary policy” could derail the economic recovery.

The Fed, the US central bank, has been on an aggressive $85 billion a month bond-purchase programme, known as quantitative easing, as part of measures to boost the economy.

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