Crude prices drop on weak Chinese manufacturing data

Oil prices eased in Asian trade on Monday on demand fears after data suggested China's manufacturing activity contracted in March to its weakest rate in eight months.

New York's main contract, West Texas Intermediate for May delivery, eased 19 cents to USD 99.27 a barrel in mid-morning trade, and Brent crude for May dipped 18 cents to USD 106.74.

HSBC said preliminary readings showed Chinese factory activity had contracted in March, adding to concerns about the world's number two economy.

The British banking giant's flash purchasing managers index (PMI) came in at 48.1, an eight-month low and down from 48.5 in February. A final figure will be released next week.

Anything below 50 indicates contraction while a figure above points to expansion.

The index is a closely watched gauge of the health of the Asian economic powerhouse and key driver of global growth.

"The data will weigh on crude oil prices... Market sentiment will take a significant blow from this," Tan Chee Tat, an investment analyst at Phillip Futures in Singapore said.

Adding to selling pressure is a stronger greenback. With oil priced in dollars a stronger unit makes it more expensive for traders using other currencies.

The dollar rallied last week after Federal Reserve chief Janet Yellen suggested US interest rates could be hiked would early next year.