Brent crude oil rose above 109 dollars a barrel yesterday as U.S. jobs figures pointed to healthy economic growth, other data and higher oil demand from China. Expectations of increased fuel demand added support to an oil market already bolstered by the loss of crude exports from Libya.
In Libya, violence and civil turmoil have cut oil output by more than one million barrels per day (bpd) from pre-war levels. The Ukraine crisis is also a worry for markets in the West that rely heavily on oil and gas exports from Russia.
Brent was up 50 cents at 109.11 dollars, after settling down 18 cents and declining 0.7 per cent last week. U.S. oil rose 50 cents to 103.16 dollars, extending gains after ending 18 cents up on Friday. “Good overall economic data and healthy U.S. data are supporting oil,” said Tetsu Emori, a commodity fund manager at Astmax Investment.
“And we have had geopolitical worries that have kept oil supported.”
China’s exports gained steam in May and beat forecasts on firmer global demand, rising seven per cent from a year earlier and quickening from April’s increase of 0.9 per cent.
The strong gains overshadowed an unexpected fall in imports that could signal weaker domestic demand. The Chinese data followed U.S. figures showing employment returning to its pre-recession peak, confirming steady improvement in the world’s top economy.
May marked a fourth straight month of U.S. job gains above 200,000, a stretch last seen in January 2000. The U.S. data helped bolster Asian shares to their highest levels in nearly three years, a follow-up to Friday’s record close on Wall Street.
China, imported 26.08 million tonnes, or 6.14 million bpd of crude oil in May, bringing total shipments in the first five months of this year to 128.7 million tonnes.
China is the world’s largest consumer of energy. Some of China’s oil appears to have been going into storage. China’s slackening economy, set to grow at its slowest pace in 23 years, has blunted its oil demand.
It’s oil demand dropped to a seven-month low in April, as refineries scaled back production for maintenance and exported surplus fuel.
“Imports so far were more affected by state stockpiling, as China brings new strategic petroleum reserves sites online,” Sijin Cheng, an analyst at Barclays, said in a note.
The Organisation of the Petroleum Exporting Countries meets in Vienna this week and is likely to keep an output target of 30 million bpd.
Members of the cartel, which pumps a third of the world’s oil, are happy with oil prices and producing enough to cover most of their budget needs. “We expect no change to the joint 30 million bpd output with a muted market reaction,” VTB Capital oil and commodities strategist Andrey Kryuchenkov said.
