NEW YORK (AP) ? The price of oil dropped by nearly 3 percent Wednesday following disappointing economic news from the world's two biggest oil-consuming nations, and U.S. crude supplies grew much more than analysts expected.
Benchmark oil for June delivery was down $2.72, or 2.9 percent, to $90.74 a barrel in morning trading on the New York Mercantile Exchange.
Oil fell initially after data from China showed a slowdown in manufacturing growth. An industry group in China released data Wednesday showing that manufacturing grew at a slower pace in April and export orders had been declining steadily.
"This ongoing trend of slowing Chinese economic growth will translate to some additional downward revisions in global oil demand expectations" when OPEC, the International Energy Agency and the U.S. Energy Department issue monthly reports next week, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, in a note to clients.
The sell-off continued as weak U.S. economic data came in and the Energy Department said U.S. crude inventories expanded by 6.7 million barrels last week, nearly five times the increase analysts expected. The nation's oil production, at 7.3 million barrels per day, is the highest it's been in 20 years. Imports of foreign crude increased last week, adding to bulging supplies.
Elsewhere, data pointed to weaker demand for oil. The Institute for Supply Management's monthly report showed the manufacturing sector expanded in April for the fifth consecutive month, but at the lowest rate of the year.
The Commerce Department said construction spending fell 1.7 percent in March compared with February, as government spending cuts impacted some projects. Still, construction activity was 4.8 percent higher than a year ago at a seasonally adjusted $856.7 billion, as home building continued to increase.
Payroll processor ADP said that private employers added just 119,000 jobs last month. And March's hiring was slower than first thought. The survey shows just 131,000 jobs added, down from an initial estimate of 158,000.
Markets will also be paying attention to the Federal Reserve's policy statement coming out later Wednesday. Expectations are that the Fed will sustain its easy monetary policy to stimulate economic growth. Oil prices are seen benefiting from loose monetary policies because higher growth translates into added oil demand and because ample money supply weakens the dollar and makes crude cheaper for traders using other currencies.
Brent crude, which is used to set prices of oil from the North Sea used by many U.S. refiners, was down $2.93, or 2.9 percent, to $99.44 per barrel on the ICE Futures exchange in London.
In other energy futures trading on the New York Mercantile Exchange:
? Wholesale gasoline fell 9 cents to $2.71 a gallon.
? Heating oil retreated by 5 cents to $2.78 a gallon.
? Natural gas rose 7 cents to $4.41 per 1,000 cubic feet.
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Martin Crutsinger in Washington, Pamela Sampson in Bangkok and Pablo Gorondi in Budapest contributed to this report.
Source: http://news.yahoo.com/oil-sinks-china-manufacturing-us-supplies-150845308.html
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