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Oil erases early losses
Aggregated Source: Shanghai Daily: Business

AN afternoon recovery in US stock markets helped oil reverse early losses yesterday.

Benchmark oil for July delivery fell 3 cents to close at US$94.25 a barrel on the New York Mercantile Exchange. The price sank as low as US$92.21 in the morning after weak manufacturing data from China raised questions about the strength of oil demand in the world's No. 2 economy.

Global stock markets showed sharp declines amid indications that the US Federal Reserve's may pull back on its economic stimulus program. Tokyo's Nikkei 225 index of shares fell 7.3 percent. But US stocks recouped most of their losses by midday, as investors saw the declines as overdone. Oil traders followed, at one point pushed oil to a small gain.

HSBC Corp. said a preliminary version of its monthly purchasing managers' index fell to 49.6 for May from 50.4 in April. Numbers below 50 indicate contraction. That sank oil prices because a downturn in energy-hungry China would likely lead to a decline in crude demand.

Ample US supplies of crude oil and refined products such as gasoline continue to weigh on oil prices, even as the summer driving season gets underway in the US with Memorial Day weekend.

"Ahead of the start of the summer driving season, (gasoline) stocks are 6 percent up on the long-term average and 10 percent higher than last year's level," said a report from Commerzbank.

Brent crude, a benchmark for many international oil varieties, fell 16 cents to US$102.44 a barrel on the ICE Futures exchange in London.

In other energy futures trading on Nymex:

- Wholesale gasoline rose 1 cent to US$2.83 a gallon.

- Heating oil lost 1 cent to US$2.86 a gallon.

- Natural gas rose 8 cents to US$4.26 per 1,000 cubic feet.

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Copyright Shanghai Daily: Business