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Oil climbs above $72 as Chinese manufacturing accelerates

Oil climbs above $72 as Chinese manufacturing accelerates
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First Published: Wed, Sep 01 2010. 09 02 AM IST
Updated: Wed, Sep 01 2010. 09 02 AM IST
Singapore: Oil rebounded half a percent to top $72 on Wednesday after China’s manufacturing industry accelerated last month, easing investors’ concern about the faltering pace of global economic recovery.
Prices tumbled 3.7% on Tuesday on signs US that stockpiles rose further last week and bad weather was set to suppress gasoline demand at the end of the driving season.
Appetite for raw materials was also depressed in the previous session after minutes from the US Federal Reserve’s latest meeting showed policymakers saw increasing risks to growth, contributing to the cautious mood, and a regional index of business activity rose less than expected.
US crude for October rose as much as 0.4% to $72.21 a barrel and was up 26 cents at $72.18 by 7:51am, while ICE Brent climbed 27 cents to $74.91.
China’s purchasing managers’ index (PMI) rose to 51.7 in August from 51.2 in July, official data showed on Wednesday, marking the 18th straight month it has stood above the threshold of 50 separating expansion from contraction in the world’s second-largest oil user.
“Commodity markets generally seem to have been worrying less about China and more focused in the United States recently, but China is obviously very important,” said Ben Westmore, a commodities analyst at National Australia Bank.
“The underlying strength in that economy is still sound, such that commodity demand and demand for oil will continue to be strong in the next couple of years.”
Markets also awaited manufacturing PMI data from the euro zone and the United States later on Wednesday.
Oil fell more than $7 and almost 9% in August, its biggest monthly percentage loss since May, as the outlook for the US economy deteriorated. Prices hit a 2010 low of $64.24 on 20 May, the weakest front-month price since July 2009, after reaching a 2010 peak of $87.15 on 3 May.
US crude stockpiles jumped 4.8 million barrels last week, the industry-funded American Petroleum Institute (API) said on Tuesday, more than four times an expected gain of 1.1 million barrels.
Drops in fuel stockpiles were smaller than the crude increase, at 589,000 barrels for gasoline and 1.9 million barrels for distillates including heating oil and diesel, according to the API.
The Energy Information Administration will publish government statistics on inventories and demand on Wednesday at 1430 GMT. Expectations are for gasoline supplies to have declined 200,000 barrels and distillates to have gained 1.2 million in the week to 27 August, a Reuters survey showed.
Next Monday’s US Labour Day holiday is the traditional end of the summer driving season and MasterCard said US weekly retail gasoline demand fell 3.1% last week and managed a rise of only 0.7% versus a year-ago.
Hurricanes, now at the peak of the storm season, could potentially could have a bigger negative effect on US gasoline consumption than on crude production and refining. They have so far posed little threat to rigs and refineries on the Gulf of Mexico coast.
Powerful Hurricane Earl churned toward the eastern US seaboard on Tuesday and looked to sideswipe the densely populated coast from North Carolina to New England, the US National Hurricane Center said late on Monday.
Forecasters expected the main core of the Category 4 hurricane to stay offshore as Earl moved parallel to the coast during the upcoming Labor Day holiday, disrupting holiday plans.
The US National Hurricane Center was monitoring two other tropical systems in the Atlantic, but computer models showed no immediate threat to Gulf of Mexico oil infrastructure.
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First Published: Wed, Sep 01 2010. 09 02 AM IST
More Topics: Markets | Oil | Commodities | Gasoline | Crude Prices |