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Update: Brent oil tumbles under US$60 for first time since 2009

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The price of Brent oil slumped Tuesday to a fresh five-year low below US$60 per barrel, as weak Chinese manufacturing data stoked global demand concerns, with sentiment also plagued by over-supply.

[LONDON] Brent oil slumped on Tuesday to a new five-year low below US$60 per barrel, as shrinking Chinese manufacturing activity stoked global demand concerns, with sentiment also plagued by over-supply.

In morning London deals, the price of Brent North Sea crude for delivery in January sank to US$59.49, hitting a low last seen in July 2009.

China’s manufacturing activity worsened in December with HSBC’s purchasing managers’ index (PMI) hitting a seven-month low, the bank said, signalling more weakness in the world’s second-largest economy and top energy consumer.

The preliminary PMI for the month came in at 49.5, below the break-even point dividing expansion and contraction.

The result, compiled by information services provider Markit, was lower than November’s final reading of 50.0 and the weakest result since May’s 49.4. The December reading also marked the first move into the contraction range in seven months.

“China PMI manufacturing data adds to global growth uncertainty,” said Mike van Dulken, head of research at Accendo Markets.

“If China’s manufacturing is not growing, it suggests the rest of world is not consuming as much, so China needs to consume less energy in order to make less goods,” he told AFP.

“As the number two economy, that’s a lot of energy. And a lot of goods – which adds to worries that rest of world is consuming less because (it is) not growing as much.” The Brent contract later stood at $59.78, down $1.28 from Monday’s closing level.

“The Chinese data ... suggests that growth metrics and demand for oil/commodities are slowing,” added Atif Latif, head of trading at Guardian Stockbrokers in London.

Meanwhile on Tuesday, the dollar hit a new record against the ruble as plunging oil prices and geopolitical tensions slammed the Russian economy.

Russia’s central bank earlier Tuesday hiked interest rates from 10.5 per cent to 17 per cent to halt a slide in the ruble, which has come as the country is battered by slumping oil prices and Western sanctions over Moscow’s support for Ukrainian separatists.

“Russia’s desperate attempt to shore up the ruble after recent slump suggests it could be worried (about) worse to come,” Mr van Dulken added. 

AFP