The price of oil slipped below $89 a barrel Tuesday after a slowdown in China's manufacturing reinforced concerns over the level of demand in the global economy.
By early afternoon in Europe, benchmark oil for June delivery was down 73 cents to $88.46 a barrel in electronic trading on the New York Mercantile Exchange. The expired contract for May rose 75 cents to finish at $88.76 on Monday.
The fall comes after HSBC Corp. revealed that its preliminary reading of its monthly purchasing managers' index for China declined to a worse-than-expected 50.5 in April from March's 51.6 on a 100-point scale. Readings above 50 indicate expansion.
"This has prompted growing fears that oil demand could decline in the world's second-most important oil consumer country, which in previous years has been a driving factor for global oil demand," analysts at Commerzbank in Frankfurt said in a report. "According to the IEA, China is also set this year to account for half of the expected growth in demand."
The downbeat Chinese survey follows last week's news that Chinese economic growth in the first quarter of the year unexpectedly declined to an annual 7.7 percent from the previous quarter's 7.9 percent rate.
Investors are also awaiting fresh information on U.S. stockpiles of crude and refined products.
Data for the week ending April 19 is expected to show a build of 1.4 million barrels in crude oil stocks and a draw of 700,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.
Brent crude, which is used to price oil used by many U.S. refiners, was down 81 cents to $99.58 a barrel on the ICE Futures exchange in London.
In other energy futures trading on the Nymex:
— Gasoline declined 2.92 cents to $2.7323 per gallon.
— Heating oil dropped 0.91 cent to $2.7863 a gallon.
— Natural gas added 0.5 cents to $4.272 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.
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