Oil prices up but still near 7-month lows as Chinese economy ebbs

Oil lingered near seven-month lows around $90 a barrel Thursday in Asia as Europe's debt crisis festers and China's economy continues to slow.

Benchmark oil for July delivery was up 25 cents to $90.15 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.95 to settle at $89.90, the lowest since Oct. 21, in New York on Wednesday. Brent crude for July delivery was down 8 cents at $105.48 per barrel in London.

Crude has plunged about 15 percent from $106 three weeks ago because economic growth and oil demand in Europe, the U.S. and China are likely to be less than expected this year.

On Thursday, HSBC Corp. said its Purchasing Managers Index based on a survey of Chinese manufacturers showed activity weakened further in May.

A preliminary PMI, based on responses by 85 to 90 percent of companies surveyed for the full index which is released later, fell to 48.7 from April's 49.3 on a 100-point scale. Numbers below 50 indicate a contraction.

China's Cabinet promised Wednesday to step up efforts to boost growth after the economy expanded 8.1 percent in the first quarter, the lowest in almost three years.

Political turmoil this month in Greece has also spooked investors, who fear the country may leave the euro common currency, which could spark financial and economic chaos in Europe.

"The number one issue is the uncertainty and financial instability a chaotic Greek exit from the euro would cause," said Victor Shum, an energy analyst with consultant Purvin & Gertz in Singapore. "However, barring such an exit, crude demand should improve over the summer and prices should strengthen moderately."

Tightening crude supplies in the U.S. have also weighed on oil prices. The Energy Department's Energy Information Administration said Wednesday that crude inventories last week rose for a ninth consecutive week.

In other energy trading, heating oil was up 0.3 cent at $2.82 per gallon and gasoline futures were steady at $2.80 per gallon. Natural gas slid 1.2 cents at $2.73 per 1,000 cubic feet.

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