Oil drops more than 1% on trade war jitters, Chinese data

Beijing warns of instability in global markets as US considers delisting Chinese firms from its bourses

LONDON: Oil slipped on Monday as China's economic outlook remained weak even as manufacturing data improved, with the continuing trade war with the United States weighing on demand growth for the world's largest crude importer.

Brent crude futures were down $0.8, or 1.3%, at $61.11 a barrel by 1415 GMT. US West Texas Intermediate (WTI) crude futures fell $0.46, or 0.8%, to $55.45.

China's official Purchasing Managers' Index (PMI) rose to 49.8 in September, slightly better than expected and advancing from 49.5 in August.

However, it remained below the 50-point mark that separates expansion from contraction on a monthly basis, data from the National Bureau of Statistics showed.

China warned on Monday of instability in international markets from any "decoupling" of China and the United States, after sources said that US President Donald Trump's administration was considering delisting Chinese companies from US stock exchanges.

Meanwhile, top oil exporter Saudi Arabia has restored capacity to 11.3 million barrels per day after an attack on its processing facilities in September, sources told Reuters last week, though Saudi Aramco has yet to confirm its operations have been restored fully.

While Saudi Arabia is maintaining exports by using crude from inventories and spare production capacity, it remains unclear how much of its output has actually been restored.

Saudi Arabia's Crown Prince Mohammed bin Salman, often referred to as MBS, warned in an interview broadcast on Sunday that oil prices could spike to "unimaginably high numbers" if the world does not come together to deter Iran, but said he would prefer a political solution to a military one.

"The remarks by MBS help to alleviate immediate concerns around escalations in the Middle East, leaving the market to revert its focus to the economy," BNP Paribas global oil strategist Harry Tchilinguirian told the Reuters Global Oil Forum, noting the risk posed by the US-China trade dispute.

Money managers cut their net long US crude futures and options positions in the week to September 24, the US Commodity Futures Trading Commission (CFTC) said on Friday.

"Clearly, speculators have taken comfort from Saudi comments and the speed at which they plan to bring supply back to the market," ING bank said in a note.

"However, we still believe that the market is underpricing the geopolitical risk in the region."

Oil prices are likely to remain steady this year, a Reuters survey showed on Monday, with supply shocks such as the attack on Saudi Arabia countering flagging demand.

Analysts forecast that Brent crude would average $65.19 a barrel in 2019 and WTI $57.96.