The price of oil fell below $93 a barrel Tuesday as traders scaled back their optimism about the U.S. economy following a report that showed a drop in factory activity.
By early afternoon in Europe, benchmark oil for July delivery was down 55 cents to $92.90 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, the Nymex contract added $1.48 to close at $93.45 a barrel.
Data showing that manufacturing activity in the U.S. slowed in the month of May boosted energy markets Monday because traders believed the weaker the economy would push the U.S. Federal Reserve to continue its monetary stimulus measures.
The Institute for Supply Management said Monday that its index of manufacturing activity fell to 49 last month from 50.7 in April. Readings below 50 indicate a contraction.
But sentiment has soured since Monday. Analysts at DBS Bank Ltd. in Singapore said the data was worrisome because it reflected a trend, not a one-time event, since the reading has dropped every month since February.
"The ISM dropped to 49 in May. That's not weak, that's negative. Below zero. Under water ... best not to look for a rebound next month," DBS said in a market commentary.
Traders will later be monitoring fresh information on U.S. stockpiles of crude and refined products.
Data for the week ending May 31 is expected to show a draw of 1 million barrels in crude oil stocks and a build of 1 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.
Brent crude, a benchmark for many international oil varieties, was up 2 cents to $102.08 a barrel on the ICE Futures exchange in London.
In other energy futures trading on the New York Mercantile Exchange:
— Wholesale gasoline added 0.84 cent to $2.7935 a gallon.
— Heating oil rose 0.14 cent to $2.8348 per gallon.
— Natural gas advanced 2.4 cents to $4.015 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.