China’s latest economic update has added a fresh note of bullishness to oil markets, as it showed the first expansion in manufacturing activity in six months.
The purchasing managers’ index reading for March stood at 50.8, up from 49.1 for February, Reuters reported, adding that export orders increased as well.
“From the indicators, domestic supply and demand has improved, while homeowner and business confidence is recovering, while willingness to consume and invest are increasing,” Chinese Everbright Bank analyst Zhou Maohua told Reuters.
Sure enough, oil prices started to trade this week with a gain, buoyed by the Chinese data, extending the rally from last week, even as several markets remained closed Monday for the Easter holiday.
Crude oil prices have now risen for three months in a row and they may well still have higher to go. Among the factors driving them up, besides OPEC+ cuts, is a Russian supply decline as the country says it will not focus on reducing oil production rather than exports as it did in previous months in a mix of reductions per the OPEC+ agreement.
Meanwhile, some 1 million bpd in refining capacity in Russia is offline as a result of Ukrainian attacks, Reuters noted in its report, citing Energy Aspects as saying that “Geopolitical risks to crude and heavy feedstock supplies add to strong Q2 24 demand fundamentals.”
One new factor that helped prices higher was demand, specifically in Europe. Goldman Sachs analysts reported that European demand for oil had proven stronger than expected, adding 100,000 bpd in February from a year earlier, in stark contrast to the bank’s expectations of a 200,000 bpd contraction.
Demand from China is still expected to be weak, it appears, but the latest PMI reading might lead to revisions in demand forecasts in the world’s largest importer of the commodity.
By Charles Kennedy for Oilprice.com
Read More:China PMI Sends Bullish Signal to Oil Market
2024-04-01 06:28:17