Oil
futures climbed on Thursday, with the U.S. benchmark reclaiming the $60 level
as disappointing manufacturing data from China and the eurozone boosted
prospects for economic stimulus measures, which could help increase energy
demand.
News of
a third straight weekly decline in U.S. crude inventories and tensions in the
Middle East continued to provide support to oil. Natural-gas prices also
climbed following a slightly smaller-than-expected increase in weekly U.S.
stockpiles.
July crude CLN5, +2.29% climbed $1.39, or 2.4%, to
$60.37 a barrel on the New York Mercantile Exchange. July Brent crude LCON5, +1.86% on London’s ICE Futures exchange
rose $1.39, or 2.1%, to $66.41 a barrel.
As the
Federal Reserve “looks to defer interest rate hikes amid economic softness, and
as Chinese manufacturing showed contraction once again, and as the eurozone
economy sees slowing in both its manufacturing and services sectors, crude is
back in the realm of ‘bad is good’ and rallying,” said Matt Smith, commodity
analyst at Schneider Electric.
“The prospect of aforementioned
deferred interest rate hikes are weakening the U.S. dollar DXY, -0.31% while the prospect of further stimulus
from China and souped-up quantitative easing in the Eurozone is encouraging the
[oil] market higher,” he said in a note.
The preliminary HSBC China
Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing
activity, edged up to 49.1 in May,
but it’s still below the 50 threshold that separates expansion from
contraction.
In the eurozone, the economy slowed for the second straight month
in May.
The
minutes of the April FOMC meeting released Wednesday showed U.S. Federal
Reserve officials hinting that they’re unlikely to raise interest rates in June
amid a slowdown in economic growth. This is supportive for commodities prices
including oil.
Commodities
have been under pressure due to recent rate-hike expectations, as higher
interest rates increase the cost of storing commodities, and make it less
attractive for investors seeking better returns across assets.
Meanwhile,
traders and shipping companies are keeping a close watch on the standoff
between Iranian warships and U.S. and Saudi Arabian naval forces off the coast
of Yemen. The United Nations said negotiations for a diplomatic solution to
fighting in Yemen will begin May 28 in Geneva.
Oil prices had gained 1.7% on Wednesday after the EIA’s data showed that U.S.
commercial crude-oil inventories fell by 2.7 million barrels in the week ended
May 15.
“Crude
stocks continued to draw seasonally, and we expect crude and product demand to
remain supportive as economic activity rebounds following a weak first
quarter,” Société Générale said in a report.
Back on Nymex, June gasoline RBM5, +1.46% added 3 cents, or 1.5%, 0.1% to $2.071
a gallon, while June heating oil HOM5, +1.65% traded at $1.977, up 3.1 cents,
or 1.6%.
Natural-gas
futures climbed higher after the EIA said supplies of natural gas rose by 92
billion cubic feet for the week ended May 15. That was a bit less than the
climb of between 93 billion cubic feet and 97 billion cubic feet expected by
analysts polled by Platts.
June natural gas NGM15, +1.75% tacked on 5.4 cents, or 1.9%, to
$2.969 per million British thermal units. It was trading around $2.95 before
the data.
Article Source-http://www.marketwatch.com/story/oil-edges-higher-after-strong-chinese-manufacturing-data-2015-05-21
