Oil is falling on fears of weak demand in China

Oil prices fell in Asian trading on Tuesday, extending losses incurred in the previous session, as weak economic data from China and expectations of a US interest rate hike cast a shadow over the market.

Brent crude fell 24 cents, or 0.3 percent, to $79.07 a barrel by 0615 GMT, and US West Texas Intermediate crude fell 25 cents, or 0.3 percent, to $75.41 a barrel. Both benchmarks fell more than a dollar in their latest session.

“The negative pressure on oil means that the economic recovery in China is not really promising, which hinders the outlook for fuel demand,” said Tina Ting, an analyst at CMC Markets.

Official data on Sunday showed that manufacturing activity in China fell unexpectedly in April, in the first contraction in the manufacturing PMI since December.

China’s industrial and economic recovery from the coronavirus pandemic was expected to boost demand this year.

Monday’s survey showed expectations that US crude oil inventories would decline for the third week in a row, which supported the market somewhat.

The Federal Reserve, which meets on Tuesday and Wednesday, is expected to raise interest rates by another 25 basis points. This hike, which central banks are doing to combat inflation, may affect oil through slowing economic growth and lower energy demand.

Concerns about the banking sector have also affected oil in the past few weeks.

In what was the third collapse of a major US corporation in two months, US regulators seized First Republic Bank this week before it agreed to sell most of its shares to JPMorgan.