Oil climbs near $78, China data supports

Oil climbs near $78, China data supports
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First Published: Mon, Nov 02 2009. 04 02 PM IST
Updated: Mon, Nov 02 2009. 04 02 PM IST
London: Oil rose towards $78 a barrel on Monday, recovering from the previous session’s drop, after manufacturing data from China revived expectations economic recovery would generate extra fuel demand.
But traders and analysts said the mood was still cautious as equities markets sank to one-month lows and braced for the possible withdrawal of stimulative monetary policy as major central banks meet this week.
US crude for December delivery rose 95 cents to $77.95 a barrel by 4:00pm, reversing some of Friday’s loss of $2.87. Brent crude rose $1.12 to $76.32.
Monday’s gains followed news HSBC’s China Purchasing Managers’ Index (PMI) had risen for the seventh straight month in October, to an 18-month high of 55.4, pointing to sustained strength in the country’s vast manufacturing sector.
“Chinese demand is a straw in the wind,” said Christopher Bellew of brokerage Bache Financial.
“But patchy, fragile are the sort of words being used to describe recovery. There is no real sign of demand increasing.”
FAILURE TO HOLD ABOVE $80
After hitting a high for this year of $82 a barrel in late October, US crude failed to sustain gains above $80.
Its 3.6% fall on Friday followed data from the United States, the world’s biggest energy consumer, showed weaker consumer sentiment in October and consumer spending cuts in September.
The figures also dragged down equities markets, which extended losses on Monday as investors anticipated a week of meetings at major central banks, including the US Federal Reserve and European Central Bank.
World stocks as measured by MSCI were down 0.9%, adding to last week’s more than 4% loss, the largest since early March just before the rally began.
Adding to the negative mood, CIT Group Inc, a US lender to hundreds of thousands of small and medium-sized businesses, filed for bankruptcy on Sunday.
During the protracted equities rally that set in March, oil markets mostly moved higher in conjunction with stock market gains, while being negatively correlated to the US dollar.
The dollar edged lower against a basket of currencies on Monday, potentially lending modest support to oil and other dollar-denominated commodities, which become cheaper for non-dollar investors when the US currency falls.
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First Published: Mon, Nov 02 2009. 04 02 PM IST
More Topics: Markets | Oil | Commodity | Crude Prices | US |