Crude Plunges On China PMI And Rising Stockpiles, Eyes On Europe

Doubts over the strength of recovery in China, the world`s second-biggest oil consumer, and the rise in U.S. gasoline weighed on oil prices on Thursday. Meanwhile, the U.S. Federal Reserve is divided on when it may start to pull back its stimulus the dollar rose.

Manufacturing in China shrank in May for the first time in seven months to 49.6, reflecting slower domestic demand which is unable to offset softer demand from the U.S. and the European Union, darkening the outlook for demand on oil.

Moreover, data from the Energy Information Agency showed that gasoline stockpiles in the U.S. rose 3 million barrels last week to 220 million, near the highest for this time of year since 1999, sparking expectations of a drop in prices, unless demand picks up.

- Crude is trading around $93.23 a barrel with the highest at $94.15 and the lowest at $93.10.

- Brent is trading around $101.59 a barrel as of this writing after falling 0.89% or $1.01.

Also weighing on oil prices is the dollar`s jump to a three-year high at 84.59, as the appetite for safe haven increased after the minutes from the last Fed policy setting meeting triggered speculations the central bank may begin to pull back on its monetary stimulus this year.

Comments from the Federal Reserve Chairman Ben Bernanke on Wednesday`s testimony confirmed that reducing the bond purchases will depend on an improvement in the economic data. But Bernanke added that the Fed could "in the next few meetings take a step down" in its purchases.

Focus will turn today to Europe, as Euro zone`s PMI and consumer confidence, UK’s GDP and Spain’s bong auction due for later may also offer clues to the health of the troubled region`s economies. The U.S. will release its new home sales and jobless claims.

- Natural gas is trading at $4.216 per cubic feet after rising 0.72%.

- Gasoline is trading at $2.8034 a gallon after falling 0.57%.

- Heating oil is trading at $2.8555 a gallon after falling 0.63%.