WTI Trades Near 4-Week High on China Factory Data; Brent Steady

May 21, 2014 11:50 pm ET

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May 22 (Bloomberg) -- West Texas Intermediate traded near the highest price in more than four weeks after a Chinese manufacturing gauge rose, signaling a stabilizing economy in the world’s second-biggest oil consumer. Brent was steady in London.

Futures were little changed in New York after advancing 1.6 percent yesterday. China’s preliminary Purchasing Managers’ Index was 49.7 for May, up from 48.1 the previous month and the highest reading this year, according to HSBC Holdings Plc and Markit Economics. Crude stockpiles in the U.S., the largest oil user, fell by 7.23 million barrels last week, the Energy Information Administration reported yesterday.

“The PMI almost came as a surprise because data released two weeks ago weakened our expectation that the Chinese economy will soon recover,” Hong Sung Ki, a senior analyst at Samsung Futures Inc., said by phone today. “It’s meaningful that the number today has reached close to 50, which gives a positive outlook for oil prices.”

WTI for July delivery was at $104.02 a barrel in electronic trading on the New York Mercantile Exchange, down 5 cents, at 12:48 p.m. Seoul time. Front-month futures climbed $1.63 to $104.07 yesterday, the highest close since April 21. The volume of all contracts traded was about 6 percent below the 100-day average. Prices have gained 5.7 percent this year.

Brent for July settlement was 4 cents higher at $110.59 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude was at a premium of $6.57 to WTI. The spread closed at $6.48 yesterday, the narrowest in a month.

China Economy

HSBC and Markit’s PMI reading for China exceeded the median estimate of 48.3 in a Bloomberg News survey of economists. It’s also higher than the final April figure released May 5 and remains below 50, signaling a fifth month of contraction.

Communist Party leaders are betting that measures such as tax breaks and accelerated spending on railways will help protect an economic growth target of 7.5 percent for 2014. The Asian nation will account for about 11 percent of global oil demand this year, compared with 21 percent for the U.S., forecasts from the International Energy Agency in Paris show.

U.S. crude inventories dropped to 391.3 million barrels in the week ended May 16, said the EIA, the Energy Department’s statistical arm. Supplies were projected to be unchanged near a record high, according to the median estimate in a Bloomberg survey of nine analysts.

“Crude stockpiles are falling faster than expected as they’re now going into the peak summer season,” Hong said of increased motor-fuel consumption.

Gasoline inventories expanded by 970,000 barrels to 213.4 million last week, the EIA report shows. Distillates, including heating oil and diesel, were up 3.4 million at 116.3 million.

--With assistance from Ben Sharples in Melbourne.