Oil edges higher, as market digested improved economic data from China
On Wednesday oil prices traded higher, as investors weighed improving economic data from China against signs of a continuing supply glut in the U.S, says The Wall Street Journal.
On Wednesday Saudi Arabia’s oil minister, Ali al-Naimi, said that oil demand was growing and that markets have calmed. “Why do you want to rock the markets? The markets are calm. Demand is growing,” Mr. Naimi told reporters on the sidelines of a conference in Saudi Arabia.
Recently, oil prices have stabilized after a rally from their mid-January lows. But analysts are still reluctant to call a bottom after crude’s dramatic fall last year because global supply is still overshooting demand.
Brent, the global benchmark, rose 65 cents, or 1.1%, to $59.31 on ICE Futures Europe. Light, sweet oil for April delivery recently rose 5 cents, or 0.1%, to $49.33 on the New York Mercantile Exchange.
On the one hand, traders are keeping an attentive eye on signs of improving demand. The latest manufacturing gauge in China, the world’s second biggest oil consumer, showed a modest improvement in February. The preliminary HSBC China Manufacturing PMI rose to 50.1 compared with a final reading of 49.7 in January, data showed. A reading over 50 indicates expansion.
“Chinese manufacturing is no longer contracting, as it had in December and January,” said Jason Schenker, president of Prestige Economics LLC, in a note. “This seems to indicate that the bottom for the Chinese economy is likely behind us, which is bullish for oil prices.”
On the other hand, on the supply side, the surplus of oil in the U.S. shows little signs of declining. The American Petroleum Institute said late Tuesday that U.S. crude stocks rose by a large 8.9 million barrels last week.
Later Wednesday, the U.S. Energy Information Administration will post its official data, and analysts expect oil stocks to have increased by 4.7 million barrels. The EIA will also release data on U.S. oil production, which is currently running at a multiyear high of around 9.3 million barrels a day.
“Unless production drops to below 9 million barrels a day, we do not expect this oversupply issue to end,” Daniel Ang, analyst at Phillip Futures, wrote in a note to clients.
In its February report, the BlackRock Investment Institute said the oil price could fall below $45 a barrel but the market appears close to a bottom based on past peak-to-trough declines,
“We expect a modest recovery next year, but think a return to $100-plus prices is far-fetched due to advances in drilling technology,” BlackRock said. It estimated that the current oil oversupply stands at around 2% of global oil demand—the highest level since the Asia crisis of the late 1990s.
Gasoline futures recently rose 0.2% to $1.6226 a gallon, while diesel futures slid 0.1% to $2.0276 a gallon.
