Oil rises as investors pin hopes on Chinese stimulus
Tokyo — Oil prices rose on Thursday as investors banked on more economic stimulus by China after weak purchasing managers’ index (PMI) data, partly recovering from losses in the previous session on a surprise build in US crude stocks.
Brent crude futures were up 24 cents, or 0.4%, at $60.85 a barrel by 2.21am GMT, having fallen earlier in the session. They dropped 1.6% on Wednesday.
US West Texas Intermediate (WTI) crude futures were up by 10 cents, or 0.2%, at $55.16 a barrel. They ended 0.9% lower in the previous session.
Factory activity in China shrank for a sixth straight month in October, while growth in China’s services sector activity slowed to the lowest since February 2016, official data showed on Thursday.
“The move up in oil is driven by the expectation that more China stimulus is now on the way after the six-month low in the China manufacturing PMI,” said Jeffrey Halley, senior market analyst at Oanda.
“The kneejerk response … was to sell commodities and energy, but central banks globally have itchy trigger fingers at the moment with regards to easing and I believe China will be no different,” he said.
The US Federal Reserve on Wednesday cut interest rates for a third time in 2019, with the Fed’s stance vouching for the durability of an economic expansion that is now the longest on record.
Rate cuts can often be bullish for oil prices because a stronger economy typically implies higher demand for crude.
Still, prices are likely to be capped until inventories start to show sustained declines.
Crude inventories rose 5.7-million barrels in the week to October 25, the US Energy Information Administration said on Wednesday, compared with analysts’ expectations for a 494,000-barrel build.
On Tuesday, the American Petroleum Institute, an industry group, had reported a 708,000-barrel decline in inventories, raising hopes that official figures would also show a drop.
Crude stocks at the Cushing, Oklahoma, delivery hub for US crude futures rose for a fourth straight week, gaining 1.6-million barrels last week, the EIA said.
But gasoline and distillate inventories extended their declines even as refiners ramped up production, it said.