Oil falls towards $57 as demand concerns outweigh supply disruptions
In the previous session, both Brent and U.S. crude hit their lowest levels since May 2009
Brent crude prices dropped towards $57 a barrel on Wednesday as weak Chinese manufacturing data and demand concerns outweighed supply disruptions in Libya.
China's factory sector shrank for the first time in seven months in December, with the final HSBC/Markit Purchasing Managers' Index (PMI) for this month coming in at 49.6.
The final reading was higher than a preliminary reading of 49.5, but down from the final 50.0 in November. The 50.0 mark separates growth from contraction.
"Clearly, demand concerns are one of the issues for the oil market," said Michael McCarthy, chief market strategist at CMC Markets.
China is the world's second largest oil consumer and any contraction in its factory sector can have a big impact on demand.
Brent for February delivery fell 69 cents to $57.21 as of 0622 GMT, after earlier dropping as low as $56.87.
U.S. crude for February delivery was down 50 cents to $53.62.
In the previous session, both Brent and U.S. crude hit their lowest levels since May 2009.
"If we see a (PMI) number well under 49.5, it might spark further stimulus speculation and that might end up being supportive," McCarthy said of the HSBC/Markit reading.
Prices were also pressured by an unexpected build in U.S. crude stocks.
U.S. crude inventories rose by 760,000 barrels last week to 387.3 million, according to industry group the American Petroleum Institute, compared with analysts' expectations for a decrease of around 100,000 barrels.
In a research note by Phillip Futures, it said that benchmark crude prices could bottom out in the second quarter of 2015. Among the reasons cited were U.S. crude output being curtailed by low oil prices and the Organization of the Petroleum Exporting Countries (OPEC) likely cutting production in its next meeting.
For now, global supplies are seen as overwhelming demand even with fighting in Libya cutting crude output there.
A fire raging for almost a week at Libya's biggest oil port of Es Sider has destroyed up to 1.8 million barrels of crude and damaged seven storage tanks, top oil official al-Mabrook al-Buseif said on Tuesday.
The turmoil in Libya has caused OPEC's oil supply to shrink 270,000 barrels per day (bpd) in December to a six-month low below OPEC's target of 30 million bpd.
The Obama administration on Tuesday bowed to months of growing pressure over a 40-year-old ban on exports of most domestic crude, taking two steps expected to unleash a wave of ultra-light shale oil onto global markets.