-
Oil prices started the month on bullish footing, with Brent breaking above $84 and WTI passing $77.60.
-
China’s factory activity rose for the first time in seven months while manufacturing activity expanded at the fastest rate since 2012.
-
Oil markets have been waiting for signs that China’s oil demand is rebounding, and this could be the start of an upward trend for oil.
Crude oil prices rose today driven by new data from China, which suggested its manufacturing activity was picking up after the slump amid last year’s lockdowns.
Brent crude was trading at just above $84 per barrel at the time of writing and West Texas Intermediate was changing hands at over $77.60 per barrel, both up by about 0.7 percent from yesterday’s close.
Reuters reported that China’s factory activity rose last month, for the first time in seven months. PMI data also showed manufacturing activity expanding at the fastest rate in over a decade, reinforcing expectations of a strong economic rebound in the world’s largest oil importer.
China’s oil demand is seen as the chief factor behind expectations for higher oil prices later in the year. A recent Reuters poll among economists showed most expect Brent crude to top $90 per barrel in the second half of the year. The respondents cited Chinese demand and Russian supply as factors.
The China demand expectations were so pronounced this week that they offset the American Petroleum Institute’s estimate that crude oil inventories in the United States had expanded for yet another week. According to the API, the build came in at 6.2 million barrels.
Government data on U.S. inventories from the Energy Information Administration is out later today but the EIA, too, has been reporting sizeable inventory builds over the past several weeks.
The U.S. inventory reports have capped oil price gains to an extent lately, and OPEC production data may add to that cap. According to a Reuters survey, the group’s combined output rose by 150,000 bpd in February from the previous month to a total 28.97 million barrels daily.
This is still 700,000 bpd lower than what OPEC produced in September last year but if the increase is confirmed, it would suggest OPEC is not as rigid about its output limit enforcement as demonstrated. NB: Charles Kennedy wrote this article for Oilprice.com
