Oil climbs over $59 as Saudis say demand growing
Brent crude oil climbed over $59 a barrel on Wednesday after data confirmed Chinese factories were producing more than anticipated and Saudi Arabia’s oil minister said oil demand was increasing.
Gains were limited, however, by data from the U.S. Energy Information Administration (EIA) showing U.S. crude stocks increased 8.4 million barrels previous week to a record level, plus a 2.4 million barrel get higher at Cushing, Oklahoma, delivery point of the U.S. crude oil contract.
U.S. gasoline stocks dropped by 3.1 million barrels and distillate stocks – incorporating diesel and heating oil – dropped by 2.7 million barrels, the EIA said.
Brent was up 55 cents at $59.21 a barrel by 1543 GMT, although U.S. crude futures were down by 11 cents at $49.17 a barrel.
China’s industrial sector has developed slightly this month, according to the flash HSBC/Markit Purchasing Managers’ Index. The index tested a four-month high of 50.1 in February, just on top of the 50 level that divides growth in activity from contraction. A Reuter’s poll had estimate a reading of 49.5.
China is the world’s largest energy purchaser and second prime user of oil after the United States, and even slight changes in Chinese demand can move oil prices.
The market also had a slight boost from comments by Saudi oil minister Ali al-Naimi, who spoke to reporters in the port city of Jizan, southwest Saudi Arabia.
“Markets are relaxing now … demand is rising,” said Naimi, who brought a change in the strategy of the Organization of the Petroleum Exporting Countries preceding year, when it determined not to adjust production regardless of a sharp fall in oil prices.
Oil prices fell by 60% between June and January to approximately $45 a barrel, but have since recovered some ground.
Simon Wardell, oil analyst at Global Insight, said Naimi’s comments reflected a craving for stability in the market.
“They desire to discover where the floor price is. I think they are indicating that we are not that far off the floor in the current price,” he said.
Yusuke Seta, commodity sales manager at Newedge Japan, said the China data was also a advantage for oil.
“That is good news (as it means) possible oil demand, but I assume the market needs to see more stable and concrete demand from China,” he said.