Oil prices dip on U.S. rate hike expectations, weak China PMI

Oil prices dipped on Monday as investors worried about the possibility of the Federal Reserve raising interest rates, which would impede growth and reduce gasoline demand, and concerns over lower Chinese manufacturing data combined to wipe out previous gains.

Brent futures for July delivery were down 61 cents, or 0.8%, at $79.72 a barrel at 0313 GMT, while WTI crude in the United States down 63 cents, or 0.8%, to $76.15.

Consumer expenditure in the United States remained steady in March, with an increase in outlays on services offset by a fall in goods, but continued strength in underlying inflation pressures might lead to the Federal Reserve hiking interest rates again.

This week, the Fed is likely to raise interest rates by another 25 basis points. Since March of last year, the US central bank has lifted its policy rate by 475 basis points, from near-zero to the current 4.75%-5.00% range.

Economic growth in the United States fell more than predicted in the first quarter. Businesses selling stocks in expectation of lower demand later this year due to rising borrowing rates countered an increase in consumer expenditure.

Meanwhile, China’s manufacturing purchasing managers’ index (PMI) fell to 49.2 in April from 51.9 in March, according to official data released on Sunday, falling below the 50-point threshold that distinguishes monthly expansion from contraction in activity.

Factory activity in Japan, the world’s third biggest economy, contracted for the sixth straight month in April, but the manufacturing sector was edging towards stabilisation amid a slower decline in new orders.