Oil dips further after sharp losses as weak Chinese data weighs

Investing.com -- Oil prices edged lower in Asian trade on Wednesday, retaining steep declines from the prior session as markets awaited a vote on the U.S. debt ceiling, while disappointing economic data from China brewed more concerns over sluggish demand.

China’s manufacturing sector shrank for a second straight month in May, while growth in overall business activity also contracted as a post-COVID economic rebound in the country ran out of steam.

The readings pushed up concerns over slowing oil demand in the world’s largest crude importer, and raised questions over whether a rebound in the country will drive oil demand to record highs this year.

The data came after concerns over slowing global growth and uncertainty over a U.S. debt default triggered a 4% slide in oil prices on Tuesday. While top Republican and Democrat lawmakers signaled they had reached an agreement to raise the debt ceiling, the deal still faces a vote in Congress later in the day. 

This also comes just days before a June 5 deadline for a U.S. default, which could have devastating implications for the global economy. 

Brent oil futures fell 0.3% to $73.52 a barrel, while West Texas Intermediate crude futures fell 0.3% to $69.27 a barrel by 22:16 ET (02:16 GMT). Both contracts were trading at near one-month lows. 

Sentiment was also on edge ahead of a meeting of the Organization of Petroleum Exporting Countries this weekend, as contrasting statements from Russia and Saudi Arabia saw markets grow uncertain over the cartel’s plan for more production cuts.

The cartel had unexpectedly cut production in April, with the cuts having gone into effect only earlier in May. But production and exports in Russia have still remained largely steady, with the country being a major supplier to India and China.

Uncertainty over supply and fears of weakening demand put oil prices on course for a fifth straight month of losses in May, with Brent and WTI contracts down between 7% and 10%. 

Oil prices are trading down over 10% for the year so far.

A strong dollar also weighed on crude markets, amid expectations that the Federal Reserve will keep raising rates in the coming months. Focus is now on U.S. nonfarm payrolls data, due this Friday, for more cues on that end.