NYMEX crude weaker in early Asia after China weekend interest rate cut

Investing.com - Crude oil prices fell in early Asia on Monday as China's central bank moved at the weekend to spur growth through another round of rate cuts.

On the New York Mercantile Exchange, crude oil for delivery in June fell 0.20% to $59.27 a barrel.

On Sunday, the People's Bank of China cut its benchmark interest rate by a quarter percentage point to 5.10% from 5.35%, in order to spur economic activity and boost growth, along with the equivalent deposit rate to 2.25%.

China reported a trade surplus of $34.1 billion in April, below expectations for a surplus of $39.5 billion. Exports slumped 6.4% from a year earlier last month, disappointing expectations for a gain of 2.4%, while imports sank 16.2%, worse than forecasts for a decline of 12.0%.

The slide in imports pointed to persistent weakness in the economy, fuelling speculation policymakers will do more to boost growth.

It was the third rate cut in less than six months, indicating that Beijing is becoming more aggressive in supporting the economy as its momentum slows and deflation risks rise.

The U.S. and China are the world’s two largest oil consuming nations.

Last week, West Texas Intermediate oil futures edged higher on Friday, as an ongoing collapse in rigs drilling for oil in the U.S. added to expectations that shale oil production has peaked and may start falling in the coming months.

Industry research group Baker Hughes (NYSE:NYSE:BHI) said late Friday that the number of rigs drilling for oil in the U.S. fell by 11 last week to 668, the 22nd straight week of declines and the lowest level since September 2010.

Market players have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

The U.S. Energy Information Administration said on Wednesday that crude oil inventories fell by 3.9 million barrels last week to 487.0 million, compared to expectations for an increase of 1.5 million barrels to 492.4 million.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, fell for the second consecutive week, dropping by 12,000 barrels to 61.7 million.

Elsewhere, on the ICE Futures Exchange in London, Brent for June delivery dipped 15 cents, or 0.23%, to end at $65.39 a barrel on Friday.

The Labor Department reported Friday that the U.S. economy added 223,000 new jobs in April, just below expectations for jobs growth of 224,000. March’s figure was revised down to just 85,000 from a previously reported gain of 126,000.

The unemployment rate fell from 5.5% to a near seven-year low of 5.4% last month, broadly in line with forecasts.

Recent economic reports have indicated that the U.S. economy has slowed since the start of the year, prompting many investors to push back expectations on the timing of an initial rate hike by the Fed to late-2015, instead of midyear.

In the week ahead, investors will focus on the Organization of Petroleum Exporting Counties publication of its monthly assessment of oil markets on Tuesday. Later in the same day, the American Petroleum Institute, an industry group, is to publish its weekly report on oil supplies.

Also, on Wednesday, China is to release a string of data, including reports on industrial production, fixed asset investment and retail sales.