London: Crude climbed towards $81 a barrel on Friday, approaching a seven-week high, after signals China will maintain its economic stimulus measures boosted hopes that strong growth will help drain excess oil supplies.
China’s Premier Wen Jiabao, in his annual address to the National People’s Congress, said the world’s second-largest oil consumer will continue an appropriately easy monetary stance and an active fiscal policy.
US crude for April gained 44 cents to $80.65 a barrel by 3:40pm, after touching a seven-week high of $81.23 two days ago. London ICE Brent for April advanced 46 cents to $79.00.
Equity markets were higher on Friday after encouraging retail sales and jobs data from the United States suggested the world’s largest economy is stabilising, though analysts anticipate a report later on Friday will show US non-farm payrolls fell in February because of severe snowstorms.
“Fundamentally, thanks to the cold weather in the northern hemisphere, stocks including floating storage are decreasing,” said Keichi Sano, general manager of research at SCM Securities in Tokyo.
“But the market doesn’t look so strong to break above the $85 level,” Sano said. “Oil is trading in a very tight range despite recent fear of tightening monetary policy in China or Greece troubles, or upside potential because of Iran tensions.”
China escaped the worst of the global slump by ramping up credit, slashing interest rates and launching a 4 trillion yuan ($585 billion) infrastructure programme in late 2008.
But in the past two months, China has restricted the amount of money that banks can lend by enforcing higher cash reserve ratios, aiming to prevent an over-heating of the economy.
Singapore said it had raised alert levels in the city-state and beefed up security at its airport and new casino resorts after a warning by its navy on Thursday of possible attacks on oil tankers the Strait of Malacca.
The Strait is a key shipping lane which carries about 40% of world trade, including an average of 15 million barrels of crude oil every day.
New York crude has traded in a $69-$84 range over the past few months amid uncertainty about the speed of the global economic recovery. Some traders and analysts say currency movements could dominate the oil price as the strength of demand remains unclear during the recovery.
“Fundamentally, the oil market has yet to see some signs of improving demand from OECD states, while we are also concerned about the pretty much flat forward curve as investors still harbour worries over the cyclical recovery,” VTB Capital analyst Andrey Kryuchenkov said.
Oil prices for contracts to be delivered in January 2012 are less than $5 a barrel above the current oil price.