Oil rises on weak US business activity, but Chinese demand data weighs on

  • US business activity weakens again in October -S&P Global

NEW YORK (Reuters) – Oil prices rose in choppy trading on Monday, as weak U.S. business data dampened expectations for further interest rate hikes, while data showed demand from China remained weak in September, capping prices.

Brent crude futures for December settlement were up 55 cents, or 0.6%, at $94.05 a barrel by 10:39 AM ET (1439 GMT), after rising 2% last week. US West Texas Intermediate crude for December delivery rose 55 cents, or 0.7%, to $85.60 a barrel. Both benchmarks fell by $1 a barrel earlier in the session.

Customs data showed that China’s crude oil imports for September, at 9.79 million barrels per day, despite rising in August, were down 2% from a year earlier, as independent refineries limited production amid weak profit margins and a decline in demand.

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β€œThe latest recovery in oil imports faltered in September,” ANZ analysts said in a note, adding that independent refineries failed to capitalize on increased quotas as the ongoing COVID-related shutdown affected demand.

ING analysts said in a note that uncertainty about the non-spreading policy of the Corona virus and the real estate crisis in China are undermining the effectiveness of pro-growth measures, even though third-quarter GDP growth exceeded expectations.

Oil prices regained some of their gains after data showed business activity in the United States contracted for the fourth consecutive month in October, as manufacturers and service firms in a monthly survey of purchasing managers reported weak customer demand.

positive signal

Standard & Poor’s Global said on Monday its US production composite PMI index, which tracks the manufacturing and services sectors, fell to 47.3 this month from a final reading of 49.5 in September.

Phil Flynn, an analyst at Price Futures Group, said that this weakness may indicate that the US Federal Reserve’s interest rate increases to fight inflation have been successful and may convince it to slow down its rate hike policies, which is a positive sign for fuel demand.

“The error in the PMI number is a sign that the economy may be slowing down a bit, which is turning out to be bullish,” Flynn said.

Brent crude rose last week despite US President Joe Biden announcing the sale of the remaining 15 million barrels of US Strategic Petroleum Reserves, part of a record release of 180 million barrels that began in May.

Biden added that his goal would be to replenish stocks when US crude reached about $70 a barrel.

But Goldman Sachs said the share issue was unlikely to have a significant impact on prices.

“Such a statement is likely to have a modest impact (less than $5 per barrel) on oil prices,” the bank said in a note.

Energy services company Baker Hughes said in a report that US energy companies added oil and natural gas rigs last week for the second week in a row as relatively high oil prices encourage companies to drill more.

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Additional reporting by Noah Browning and Florence Tan; Editing by Jan Harvey and David Holmes

Our Standards: Thomson Reuters Trust Principles.

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