On Monday crude-oil futures climbed in Asian trade after China unexpectedly announced a cut in banks’ reserve requirements.
As China is the world's second-largest oil consumer, its economic growth has a direct impact on its energy demand.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in May
CLK5 traded at $56.45 a barrel at
0433 GMT, up $0.71 in the Globex electronic session.
On London’s ICE Futures exchange June Brent crude LCOM5 rose $0.65 to $64.10 a barrel.
China’s central bank over the weekend announced a surprise one-percentage-point cut in banks’ reserve requirement. The action came a few days after data showed China’s economic growth decelerated to 7% year-over-year in the first quarter, the slowest pace in six years.
According to Brian Jackson,
China economist at IHS Global Insight, the size and timing of this cut indicates the
country’s leaders are more deeply concerned about the state of the
economy than official comments previously indicated. The move
potentially unleashes 1.2 trillion yuan in new financing to prop up
growth, he says.
At the same time, there may be too much exuberance in the market over declining U.S. oil production and a quick normalization of oil prices, according to Adam Longson, head of Morgan Stanley’s oil research.
“Most recent data points showing declines are estimates with little credibility, especially weekly production and forecasts from the EIA or IEA,” he said.
Production from the Organization of the Petroleum Exporting Countries may be more important as the group's output rose by one million barrels a day in March, from a month earlier. Saudi Arabia alone has added the equivalent of half the oil production of the Bakken fields in the U.S. in a matter of months, far beyond any U.S. slowdown, Longson said.
