By Biman Mukherji
HONG KONG--Oil prices are trading nearly flat in Asia trade
Monday, after slipping initially as China's HSBC purchasing
managers index, a widely-tracked gauge of manufacturing activity,
fell in April.
The weak data from one of the world's largest importers of crude
oil interrupted a recent rally in oil futures sparked by U.S.
dollar weakness as well as a fall in the number of U.S. rigs
actively drilling for oil, causing a drop in supplies at the
nation's storage hub.
But oil prices are not being driven by fundamentals alone, but
also by speculative trading and swings in the U.S dollar, a Morgan
Stanley report said.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in June was trading at $59.08 a barrel recently, down
22 cents in the Globex electronic session.
Brent crude for June delivery on London's ICE Futures exchange
fell marginally by 6 cents to $66.34 a barrel.
The recent price rally faces other key risks to the market,
including the possibility of a return of oil supplies from Iraq,
Iran or Libya, Morgan Stanley said.
Analysts also said a sustained rise in oil prices could lure US
oil rigs to resume drilling actively.
The market also faces pressure on the demand side, which is
expected to weaken through summer.
Despite small production cutbacks, chances of a sustained
oil-price rally are likely to be checked by ample supplies,
analysts said.
Write to Biman Mukherji at biman.mukherji@dowjones.com