Oil falls as economic fears weigh against potential crude draw

Oil prices fell in thin early Asian trade on Tuesday as the market digests weak economic data from China and expectations of another U.S. interest rate hike.

Brent crude fell by 2 cents to $79.29 a barrel by 0021 GMT, while U.S. West Texas Intermediate (WTI) crude fell 2 cents to $75.64. Both benchmarks fell by more than $1 last session.

China’s manufacturing activity unexpectedly fell in April, official data showed on Sunday, the first contraction since December in the manufacturing purchasing managers’ index.

China’s industrial and economic recovery from the coronavirus pandemic was expected to boost demand this year.

Meanwhile, the U.S. Federal Reserve, which meets on Tuesday and Wednesday, is expected to increase interest rates by another 25 basis points. Interest rate hikes often reduce demand.

Banking fears have also weighed on oil in recent weeks and in what is the third major U.S. institution to fail in two months, U.S. regulators seized First Republic Bank over the weekend ahead of a deal in which JPMorgan bought most of its assets.

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