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Oil drops after tepid US, Chinese manufacturing data

Oil prices slid on Monday after weak manufacturing data in the United States and China fuelled worries about demand in the world's two biggest oil consumers.

NEW YORK: Oil prices slid on Monday after weak manufacturing data in the United States and China fuelled worries about demand in the world's two biggest oil consumers.

New York's main contract, West Texas Intermediate (WTI) for delivery in March, ended the trading session at $96.43 a barrel, down $1.06 from Friday's close.

The European benchmark, Brent North Sea crude for March, shed 36 cents to settle at $106.04 a barrel in London trade.

The WTI contract fell sharply in morning trade, in tandem with US equities, after the Institute for Supply Management reported a surprisingly abrupt slowdown in US manufacturing activity in January.

The ISM's purchasing managers index (PMI) sank to 51.3 from 56.5 in December, with the new orders component almost stalling.

"The first notion is to blame the very cold weather and there is probably something to that. Unseasonable cold weather sneaked all the way down to the south. But weather rarely has a pronounced impact on manufacturing," said Robert Brusca, chief economist at FAO Economics.

The ISM report added to market pressures after China reported on Saturday that manufacturing activity slipped to a five-month low in January, confirming a slowdown in factory activity in the world's top energy consumer.

China's manufacturing PMI fell to 50.5, barely above the 50 level between expansion and contraction, from 51.0 in December.

Monday's oil market fall is "easily a function of the manufacturing reports, below anybody's wildest expectations in the US, and with the Chinese both private and government numbers in the last days," said Bob Yawger of Mizuho Securities.

The new data imply that global demand will not be as strong as previously thought, he said, noting that a large share of energy demand orginates in manufacturing.

Desmond Chua, analyst at traders CMC Markets, said investors will be keeping a close watch on US January job creation and unemployment data due out on Friday.

"Investors will be focused on the jobs data to see if the disappointing December numbers are a one-off as the US Federal Reserve has said, or if it is the start of something larger," he said.

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