Oil ticks lower as China data cheers; Iraq and Ukraine play out

Getty Images

Oil prices declined on Tuesday on easing concerns of supply disruptions due to the conflicts in Iraq and Ukraine, though markets gained some support from upbeat manufacturing data in China, the world's second-biggest oil consumer.

Oil markets have for weeks been rattled by supply concerns due to the Ukraine crisis and as a takeover of large areas of Iraq by Sunni militants stoked fears of disruption in exports from OPEC's second-biggest producer amid unsteady shipments from Libya and others. As those fears recede somewhat, investors are looking for fresh clues to gauge the direction of the market.

Adding to signs the economy of the world's second-biggest oil consumer is regaining strength, China's official Purchasing Managers' Index (PMI) stood at 51 in June, the National Bureau of Statistics said, quickening from May's reading of 50.8 and in line with market expectations on improving domestic and foreign demand. However, U.S. manufacturing and construction data showed slower-than-expected growth, helping to curb the market's enthusiasm.

Brent crude dipped 20 cents to stand near $112 a barrel, after ending down 94 cents at its lowest settlement since the rally spurred by the Iraqi crisis started on June 12. U.S. oil gave up early gains to settle down 3 cents at $105.34 a barrel.

Oil, particularly the U.S. benchmark, drew some support from forecasts U.S. crude inventories dropped 2.3 million barrels last week, a preliminary Reuters poll showed. It also estimated distillate stockpiles rose 600,000 barrels, with gasoline inventories increasing 800,000 barrels.

The survey was taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and from the Energy's Energy Information Administration (EIA).

A slide in OPEC's output also supported prices. The producer group's output fell in June from May's three-month high, a Reuters survey found, as fighting in Iraq closed its largest refinery and technical problems slowed its southern exports, underlining how unrest and outages in the Middle East and Africa are taking their toll on OPEC supply.

--By Reuters