Are They Joking? The Price Of Oil Drops 39 Cents And It's Blamed On A Chinese Manufacturing Index

On February 9, 2014, I wrote, regarding the price of oil:

The major factors affecting the price of oil:

• Mideast politics and hostilities (Syria, Iran, Israel); sabre-rattling
• strength of the dollar
• US economy six months out
• Chinese manufacturing index
• global economy six months out

Of the five, I think the US economy six months out as telegraphed by the Fed's actions is the most important. On a day-to-day basis, all things being equal (e.g., no report of a war breaking out in the Mideast, it is the strength of the dollar).

So, today it was "rewarding" to see this headline over at Yahoo!Finance: oil below $103 as Chinese factory activity drops. Are they joking? Oil has been quietly and slowly melting up from the low 90's to solidly over $100. It was close to $104 yesterday and today closed slightly below $103. But to say this was due to the Chinese manufacturing report seem ludicrous. Here's the lede:

The price of oil slipped below $103 a barrel Thursday after a report indicated that manufacturing in China, the world's second-biggest economy, shrank again in February.

U.S. crude for March delivery fell 39 cents to close at $102.92 a barrel in New York on the last day of trading for the contract. Crude for April delivery fell 9 cents to close at $102.75.

Oil prices fell after a monthly survey by HSBC found that China's manufacturing, a driver of the global economy, contracted for a second straight month.

The HSBC purchasing managers' index also declined to the lowest since July, a sign of the extended slowdown in China as leaders in Beijing try to clamp down on an investment boom and refocus the economy on domestic consumption.

"Results from this private sector survey have deteriorated for four months now, which indicates an unambiguous trend of domestic growth deceleration," Societe Generale economist Wei Yao said in a report.

May be the 39-cent drop on a $103-bbl or oil is due to the Chinese manufacturing report, but I doubt it's much more than just the background noise of trading. If the Chinese manufacturing report was really that significant, we should have seen a healthier pull back in the price of oil. My hunch is the reporter spoke to "his" inside source, asked the question, and the oil export simply said it had to do with the China manufacturing index. It sounded good, and the reporter went with it.