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NYMEX crude down in Asia as China PMIs fail to excite on demand

Crude oil prices dropped in Asia on Friday as investors brushed off manufacturing PMI surveys out of China for signals on demand and waited rig count data from the U.S. services firm Baker Hughes. On the New York Mercantile Exchange, WTI crude for May delivery eased 1.10% to $37.92 a barrel. Brent crude fell 1.04% to $39.91 a barrel. The Caixin manufacturing PMI for March came in at 49.7, compared with a level of 48.2 seen and 48.0 for the final in February. A level below 50 denotes contraction. Just before the Caixin, the semi-official manufacturing PMI for March came in at 50.2, compared to 49.3 seen and a final 49 in February. That represented the first gain above 50 in eight months. The non-manufacturing PMI came in at 53.8, compared to 52.7 for the final in February. The February month was said to be impacted by a drop in business during the week-long Chinese New Year holidays. In Japan, the Tankan All Big Industry CAPEX survey came in at minus 0.9%, below the 0.7% drop expected. That was the lowest in nearly three years, with expectations to worsen in the coming quarter, raising questions about the next policy steps. A positive figure indicates the majority of firms see better business conditions. Earlier, the AIG manufacturing index for March in Australia came in at 58.1, up sharply from 53.5 in February. The Japan manufacturing PMI came in at 49.1 as expected, the same level as the final in February. Overnight, U.S. crude futures posted modest gains on Thursday, amid a broadly weaker dollar, ending March with their strongest monthly gains in nearly a year. After spending a good deal of Thursday’s session in positive territory, WTI turned negative just before the close of trading. For the month, U.S. crude futures surged by more than 13%, enjoying its best month since April, 2015. Although WTI crude has retreated from 2016-yearly highs of $41.90 from last week, domestic crude futures are still up by more than 30% from their level on February 11 when it hit 13-year lows at $26.05 a barrel. On the Intercontinental Exchange (ICE), Brent crude for June delivery wavered between $39.51 and $40.85, before closing at $40.27, up 0.22 or 0.55% on the trading day. North Brent Sea futures also jumped by more than 12% on the month. Investors continued to digest to a lower than expected build in U.S. crude stockpiles last week, after the U.S. Energy Information Administration reported a gain on Wednesday of 2.3 million barrels for the week ending on March 25. Following their seventh consecutive weekly increase, U.S. crude inventories remain near historically-high levels at 534.8 million barrels. The surge in inventories comes in the face of declining production, as output fell last week to 9.022 million barrels per day, its lowest level since November, 2014. Last June, U.S. production soared above 9.6 million bpd, its highest level in more than 40 years. Crude production nationwide has fallen in 10 of the last 11 weeks, as U.S. shale producers continue to take low-performing rigs offline amid low margins. At the same time, Reuters reported on Wednesday that OPEC output in March increased by 100,000 bpd to 32.47 million bpd, led by considerable gains in Iran and Iraq. Separately, a Bloomberg survey released on Thursday found that Iran pumped 3.2 million bpd in March, its highest level since May, 2012. Saudi Arabia, meanwhile, saw its production fall mildly to 10.18 million bpd in March, ahead of a highly-anticipated OPEC-Non OPEC summit in Doha next month. Russia, Saudi Arabia and two other OPEC producers could freeze output at their respective January levels at the meeting. Crude prices worldwide are down more than 60% from their peak of $115 a barrel from June, 2014.

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