Oil prices inch close to $50

OIL1Brent crude oil rose toward $50 a barrel yesterday as a drawdown in United States crude oil stocks outweighed the negative impact of weak economic manufacturing data from China.

The American Petroleum Institute (API) said U.S. crude stockpiles fell 3.7 million barrels last week, with stocks at the Cushing, Oklahoma, delivery point for U.S. crude futures down almost 500,000 barrels.

Although total U.S. oil inventories are at record highs, the draw suggests a rebalancing of the biggest domestic oil market is under way as oil production slows in the face of low prices.

Benchmark Brent was up 30 cents a barrel at $49.38 by 1145 GMT. U.S. light crude was up 40 cents at $46.76.

The U.S. industry data helped oil resist the negative impact of a sharp contraction in Chinese manufacturing, which darkened the outlook for the world economy.

Flagging demand is dragging China’s factory sector into its sharpest contraction in 6-1/2 years, a private survey showed on Wednesday, triggering a flight to safety in Asian markets that analysts say could extend across the globe.

The preliminary Caixin/Markit China Manufacturing Purchasing Managers’ Index fell to 47.0 in September, its lowest since March 2009. Levels below 50 show a contraction.

Oil prices have been weak for over a year and are now less than half their peak levels in 2014 thanks to massive oversupply by oil producers in the Middle East and North America.

Some analysts say oil prices could be about to recover, particularly if official U.S. government figures confirm that the oil market there is starting to tighten.

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