Oil prices extend rally on China data

1st October 2010, Comments 0 comments

World oil prices hit multi-month peaks on Friday, extending the previous day's gains as positive Chinese manufacturing data spurred hopes of strengthening global energy demand.

Brent North Sea crude for November rose 95 cents to 83.26 dollars per barrel in afternoon London trade, having earlier touched 83.64 -- which was last seen on May 5.

New York's main contract, light sweet crude for November delivery, climbed 1.14 dollars to 81.11 dollars a barrel, after earlier hitting 81.40 -- a level last witnessed on August 10.

"Crude is trading higher, supported by encouraging Asian economic releases," said SEB Commodities Research analyst Filip Petersson.

Oil was given a boost by a survey out of China showing manufacturing activity picked up in September.

The purchasing managers index rose to 53.8 in September from 51.7 in August, the China Federation of Logistics and Purchasing (CFLP) announced.

The results come after an independent survey by HSBC showed manufacturing hit a five-month high last month. The HSBC China Manufacturing PMI rose to 52.9 in September, up from 51.9 in August, as production and new orders rose.

A reading above 50 means the sector is expanding, while below 50 indicates a decline.

Traders meanwhile absorbed news of better-than-expected household spending and a lower-than-forecast jobless rate in Japan.

Oil also drew strength from the weak greenback, which makes dollar-priced commodities cheaper for buyers using stronger currencies and so tends to stimulate demand and prices.

This week, oil prices have also soared on the back of a sharp drop in US crude stockpiles, which signalled rising demand, and a modest upgrade to economic growth in the key energy-consuming nation.

The market leapt on Wednesday after the US government revealed that crude oil inventories tumbled 475,000 barrels in the week ending September 24, more than forecast by most analysts.

Gasoline stocks fell 3.47 million barrels, while experts had expected a rise of 500,000 barrels. Distillate stocks fell 1.27 million barrels.

"It is quite clear that Wednesday's US product inventory draws triggered an upwards correction of oil prices," added Petersson.

"A string of supportive statistical releases has then pinned oil prices at this elevated level and fuelled further gains."

On Thursday, traders were encouraged by data showing a slowdown in US jobless claims and stronger-than-expected second quarter growth, helping bolster hopes for recovery in the world's biggest economy.

"Prices advanced about one percent on Thursday, supported by some improved economic data and currency factors," said Sucden analyst Brenda Sullivan.

"Overnight, Asian economic reports have continued their positive theme, although some of Friday's European data were slightly disappointing.

"Crude oil futures have continued their strong gains today (Friday)," she added.

© 2010 AFP

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