24 October 2013, News Wires – Brent crude futures edged up towards $108 per barrel on Thursday after positive economic data from China, the world’s second-largest oil consumer, helped offset another rise in US crude stockpiles Add Mediathat had depressed prices overnight.
Strong new orders in October drove the biggest expansion in China’s manufacturing sector in seven months, according to a preliminary Markit/HSBC survey of purchasing managers, providing further evidence the economy was stabilising.
Although, US crude oil inventories rose by 5.2 million barrels last week, the fifth-largest build of the year, with stocks at the Cushing hub rising for the second week in a row, showing there was ample supply in the world’s largest oil consumer.
Brent crude oil futures had gained 11 cents to $107.91 per barrel early on Thursday, Reuters reported.
US crude oil futures gained 61 cents to $97.47 after ending at $96.86 per barrel in the previous session, the lowest settlement price since 1 July.
“Brent will likely respond in a stronger way to the PMI data as we have seen signs of stabilisation in China’s growth … but we expect China to maintain a cautious monetary policy in the coming months,” Reuters quoted National Australia Bank economist Vyanne Lai as saying.
“So unless there’s some impetus from geopolitical risk in the Middle East, we don’t see Brent rising too strongly in the coming months.”
She added that recent high-level talks between Iran and the US, lingering uncertainties over the US budget and rising oil production in the US and Canada pointed to weaker oil fundamentals and would limit any gains in prices.
US crude oil prices continued to outperform Brent and the Brent/WTI spread narrowed to $10.44 after hitting $13 per barrel in the previous session – the widest since April.
The positive news from the Markit/HSBC Purchasing Managers Index, the earliest reading of China’s monthly economic performance, follows a pick-up in economic growth in the third quarter.
However, many economists have forecast Chinese growth slowing again, as global demand remains soft and as Beijing moves to restructure the economy towards one driven more by consumer demand than investment and credit.
Chinese money market rates have hit three-month highs as regulators show signs of concern that loose liquidity might be fuelling another round of risky credit growth.
Total US crude oil stockpiles have increased by 24 million barrels since mid-September, according to data from the US Energy Information Administration (EIA), as some 1.3 million barrels per day of refining capacity has been taken offline.
Stockpiles at the Cushing, Oklahoma, the delivery point for the US contract, have shown builds over the past two weeks, according to EIA data, snapping 14 straight weeks of drawdowns that had helped support US oil futures and tighten the discount to Brent crude.