02 June 2014, News Wires – Brent futures rose towards $110 a barrel on Monday as data showing China’s factory activity expanded at its quickest pace in five months in May revived hopes of healthy demand growth from the world’s second-biggest oil consumer.
The strong data reinforces views that China is regaining momentum in the second quarter and adds to a recent string of positive indicators from the US that suggests an improvement in the global economic outlook.
The upbeat numbers from the world’s second largest economy also helped push up the broader market, including Asia shares and base metals.
Brent crude gained 31 cents to $109.72 a barrel early on Monday, after settling 56 cents down on Friday and ending the week 1% lower. US oil increased 43 cents to $103.14, after ending the week 1.6% lower.
“The data is giving an indication that the Chinese economy is stabilising,” said Victor Shum, vice-president of energy consultancy IHS Energy Insight.
“Oil has been trading within a range and I expect that to continue as summer demand for oil is going to be stronger.”
China’s official Purchasing Managers’ Index rose to 50.8 in May from April’s 50.4, the National Bureau of Statistics said on Sunday, beating market expectations of 50.6.
“The Chinese PMI data shows that the Chinese economy is responding to the so-called mini stimulus by the government,” Shum said.
While oil prices drew support from worries over Ukraine and Libya’s repeated failure to ramp up oil exports, rising supplies from other producing countries kept a lid on gains.
Opec’s oil output has risen to a three-month high in May, a Reuters survey found on Friday, as increased supplies from Angola and a further gain in exports from southern Iraq outweighed worsening unrest in Libya.
Supply from Opec has averaged 30.02 million barrels per day, up from 29.68 million bpd in April, according to the survey based on shipping data and information from sources at oil companies, Opec and consultants.
Oil exports from Iraq rose by 8% in May and a new floating terminal was inaugurated that will expand shipping capacity from the country’s southern ports by 800,000 bpd, the oil ministry said on Sunday.
Brent is expected to break support at $109.41 per barrel soon, and then fall further to $108.43, while US oil is expected to end its current weak rebound around resistance at $103.14 and then drop to support at $102.30, according to Reuters technical analyst Wang Tao.