The price of oil fell about 1% since the beginning of the session. but remains on track for its first monthly rise since September as attacks on ships in the Red Sea fueled fears of wider conflict in the Middle East. The market is also waiting for the US reaction to the drone attack last weekend, which killed American soldiers in Jordan.
Oil traded in a narrow range for most of January before rising markedly due to the combined impact of declining U.S. inventories, China's efforts to stimulate its economy and political risks in the Middle East. Experts said that China, at least for the moment, is an obstacle to the growth of global oil demand, but problems with the supply of raw materials are likely to be the dominant force in shaping oil prices in the near future. Data released today by the National Bureau of Statistics showed that in January the manufacturing sector in China continued to contract, albeit at a slower pace. Manufacturing PMI rose to 49.2, as expected, from 49.0 in December. However, a reading below 50 points indicates a reduction in activity in the sector. The non-manufacturing index improved to 50.7 from 50.4 in the previous month. Economists had expected an increase to 50.6.
Traders are also keeping a close eye on fuel markets, which have been most affected by the turmoil in the Middle East.
Meanwhile, investors are preparing for the publication of official data on oil reserves in the United States. Yesterday, the American Petroleum Institute reported that crude oil inventories decreased by 2.49 million barrels last week. Economists expect that the report from the Energy Information Administration, which will be published at 15:30 GMT, will show a decrease in oil reserves by 0.8 million barrels.