Oil prices surged on Monday to 11-week highs after data showed US factory activity expanded last month at its fastest pace in 2.5 years. That came after a report showing manufacturing growth in China, the world’s second largest oil consumer, hit an 18-month high in November.
“Demand has been steadily growing in the United States, and China’s economy is recovering. We could see a further increase in demand next year,” said Yusuke Seta, a commodity sales manager at Newedge in Tokyo.
Brent crude for January delivery was unchanged at $111.45 a barrel early on Tuesday, after settling $1.76 higher in the previous session. US crude was up 25 cents at $94.07 a barrel, after settling up $1.10 on Monday.
Brent was also supported by news that two cargoes of Urals crude for December loading had been cancelled from the Baltic ports of Primorsk and Ust-Luga, after Russia approved a boost of deliveries to Belarus.
Ministers from Opec members Saudi Arabia and Algeria indicated on Monday that the oil cartel was likely to keep its production target of 30 million barrels per day unchanged for the first half of 2014 at a meeting in Vienna on Wednesday.
“The market is in the best situation it can be, demand is great, economic growth is improving,” Saudi Arabian Oil Minister Ali al-Naimi said.
Investors will also watch US third-quarter GDP data due on Thursday and non-farm payrolls for November due Friday for clues on whether improvements in the world’s biggest economy could prompt the US Federal Reserve to announce tapering of its monetary stimulus at its meeting on 17-18 December.
In another important indicator of demand in the US, commercial crude inventories were forecast to have dropped an average of 600,000 barrels in the week ended 29 November, a Reuters poll of analysts showed.
Data released by the US Energy Information Administration (EIA) last week showed that crude inventories rose by 3 million barrels for the week to 22 November, to the highest level for November on records dating back to 1982.
The Reuters poll came ahead of weekly inventory reports from industry group American Petroleum Institute (API) due later on Tuesday and the EIA due on Wednesday.