Investing.com - Crude prices dropped in Asia on Tuesday after weak PMI readings out of China dimmed the demand outlook.
On the New York Mercantile Exchange, WTI crude for April delivery fell 0.47% to $33.59 a barrel.
China's Caixin PMI for February came in at 48, below the 48.3 expected and last month's level of 48. A figure below 50 suggests contraction.
Earlier in China, the semi-official manufacturing PMI for February fell to 49, weaker than the 49.3 expected and last month's 49.4 level, while the non-manufacturing PMI came in at 52.7, below the last reported at 53.5.
For the China Federation of Logistics and Purchasing manufacturing it was its weakest level since November 2011.
The CFLP said in an accompanying statement that production, new orders and amount of purchase fell sharply in February because of the week-long Chinese New Year holiday.
"Input prices for iron and steel and non-ferrous metal industries saw marked increases. If the recovery momentum becomes a trend, it will help to improve companies profitability and further boost production," said the CFLP.
The CFLP also noted a spike in the sub-index measuring business expectations, jumping to 57.9 in February from 44.4 in January, suggesting strong confidence by Chinese companies over the future outlook.
Overnight, U.S. crude futures rose considerably on Monday, closing a choppy month of February relatively flat, after Saudi Arabia promised to cooperate with other major producers over the weekend in renewed efforts to limit extreme volatility on global oil markets.
Since crashing to 13-year lows at $26.05 on February 11, U.S. crude futures rallied more than 21%, ending the month at its highest closing level in more than four weeks. For the month, WTI crude closed below 1% in a positive or negative direction from its closing level in the previous in just three of 21 sessions.
On the Intercontinental Exchange, Brent crude for April delivery traded between $34.84 and $36.74 a barrel, before closing at $36.64, up 1.20 or 3.39% on the session. North Brent Sea futures have rallied by approximately 18% since briefly dropping below $30 a barrel in mid-February.
Meanwhile, the spread between the international and U.S. domestic benchmarks of crude stood at $2.84, above Friday's level of $2.32 at the close.
On Monday, crude prices extended gains from last week as investors reacted to bullish supply data and further indications that Saudi Arabia would work collaboratively with other major oil producers to help bring some stability to the struggling oil market. Separately, a survey from Reuters showed that OPEC supply declined slightly this month, providing a glimmer of hope that oil could be on the verge of halting a 20-month downturn where prices have tumbled more than 70% from June, 2014 highs of $115 a barrel.
In February, OPEC supply declined from 32.65 million barrels per day to 32.37 bpd, amid lower than expected production in Iraq, due to a pipeline malfunction that disrupted the flow of oil from a Kurdish region near the Turkey border to the Port of Ceyhan in the Mediterranean Sea. The declines were offset by production increases in Iran, whose exports rose as high as 1.75 miillion bpd. Saudi Arabian output, meanwhile, remained relatively steady near 10.2 million bpd.
"The kingdom (of Saudi Arabia) seeks to achieve stability in the oil markets and will always remain in contact with all main producers in an attempt to limit volatility and it welcomes any cooperative action," the Saudi Arabian cabinet said in a statement.
Saudi Arabia, Russia and two other OPEC members are expected to resume negotiations later next month on an accord that may result in the first deal between OPEC and Non-OPEC members in 15 years. If finalized, the two major producers could freeze their production at January levels below 11 million barrels per day.
Elsewhere, investors reacted to an unexpected easing measure by the People's Bank of China aimed at bolstering liquidity throughout the nation's financial markets. Earlier on Monday, the PBOC cut the Reserve Requirement Ratio or the amount banks must hold in reserve by 50 basis points, marking the fifth time it lowered the rate over the last year. The efforts could underpin demand for oil in China, the world's largest importer.