London: Brent crude oil rose above $110 a barrel on Monday after stronger Chinese manufacturing data suggested the world economy would avoid a double-dip recession, supporting fuel consumption.
China’s vast manufacturing sector picked up in October, snapping a three-month contraction and underscoring the resilience of the world’s second-largest economy and top energy consumer, according to HSBC’s China Flash Purchasing Managers’ Index.
The PMI data, which rose to 51.1 in October from September’s 49.9, soothed investor fears of an abrupt slowdown in China’s economy that could send an already fragile world economy into recession.
Brent crude was up 50 cents at $110.06 a barrel by 2:05pm, down from an intraday high at $110.94 a barrel.
Brent prices have risen by about 16% so far this year, and are heading for a third straight year of gains.
US crude rose 50 cents to $87.90 a barrel, after reaching an intraday high of $88.65 a barrel.
“The Chinese PMI number is better than expected and I think that is one of the main reasons for the rise,” Christophe Barret of Credit Agricole said. “Prices are volatile so the price could be corrected later in the day.”
Investors were also encouraged by signs that a summit of euro zone leaders on Wednesday could produce a viable solution to the euro zone debt crisis, although sharp differences remain over the size of losses private holders of Greek government bonds will have to accept.
European shares rose in early trade on Monday on optimism that policymakers were closer to an agreement on measures to tackle the euro zone sovereign debt crisis.
By 2:05pm, the FTSEurofirst 300 .FTEU3 index of top European shares was up 0.35% at 981.53 points, after rising 2.5 percent on Friday, and notching up four weeks of gains.
“On the EU side there is still much uncertainty around talks for a solution to the euro zone debt crisis and we are waiting for something more clear to emerge from the meetings,” Barret added.
The Brent-WTI spreads were at $22.16, down from record high levels of $27.88 at the Oct. 14 close.
Global stock markets rose on Monday and the euro gave back some of the gains it made last week, while traders waited for final details of a euro zone debt deal expected to be unveiled later this week.
The market also weighed news of the death of Saudi Arabia’s Crown Prince Sultan, with analysts saying it was not expected to affect the oil market.
Prince Sultan, who had been heir to the Saudi king since 2006 and defence and aviation minister since 1962, died of colon cancer in New York on Saturday.
In Yemen, gunfire and shelling in the country’s capital, Sanaa, killed two people on Sunday, medics said, two days after the United Nations issued a resolution condemning the violence and urging President Ali Abdullah Saleh to step down.