Oil prices drop on concerns over weak demand

Brent North Sea crude for delivery in October retreated 29 cents to US$113.89 in London midday deals.

New York's main contract, light sweet crude for October, dropped 25 cents to US$95.05 a barrel.

“Oil was pushed down by worries of global demand and no reassurance that central banks would be able to stem the tide,” IG Markets trading group said in a note to clients.

In the United States, the world's biggest consumer of crude, manufacturing unexpectedly shrank for a third straight month in August to its lowest level of the year, the Institute for Supply Management (ISM) said Tuesday.

The report came on the heels of Monday's weak August data for China, the world's biggest energy consumer, and for the 17-nation eurozone.

China's manufacturing activity fell for a tenth consecutive month to its lowest level in more than three years in August, while the Markit research firm reported eurozone manufacturing activity shrank for a seventh month.

David Hufton, analyst at PVM brokers on Wednesday said “bearish economic data, this time U.S. dominated, led markets lower.”

He added: “The prospect of monetary stimulus from the central banks of China, Europe and the U.S. looks increasingly likely in response to the deteriorating global economic climate.”

Attention was switching to a European Central Bank meeting on Thursday, and whether any fresh stimulus measures would be announced by ECB President Mario Draghi to kick start economic recovery across the eurozone.

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