WTI Rises for First Time in Four Days on China Manufacturing

Jul 01, 2014 8:18 am ET

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July 1 (Bloomberg) -- West Texas Intermediate crude rose for the first time in four days after data showed manufacturing expanded at the fastest pace this year in China, the world’s second-biggest oil user. Brent was little changed.

Futures climbed as much as 0.5 percent in New York. China’s Purchasing Managers’ Index was at 51, indicating the fastest pace of expansion this year. Crude stockpiles in the U.S., the largest oil consumer globally, are projected to have declined last week, while the Atlantic’s first tropical storm this year is forecast to form today.

“Concerns over a possible hard landing of China’s economy are easing, thus reducing one of the macroeconomic risks to global oil demand growth,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by e-mail.

WTI for August delivery gained as much as 56 cents to $105.93 a barrel in electronic trading on the New York Mercantile Exchange and was at $105.71 at 1:04 p.m. London time. The contract slid 37 cents to $105.37 yesterday, the lowest close since June 11. The volume of all futures traded was about 35 percent below the 100-day average for the time of day. Prices increased 2.6 percent in June for a second monthly advance.

Brent for August settlement rose 1 cent to $112.37 a barrel on the London-based ICE Futures Europe exchange, paring earlier gains of 47 cents, or 0.4 percent. The European benchmark crude traded at a premium of as little as $6.54 to WTI on ICE, the smallest gap on an intraday basis since June 17.

Chinese Economy

China’s manufacturing PMI increased from 50.8 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing today. A similar gauge from HSBC Holdings Plc and Markit Economics rose to 50.7 from 49.4 in May. Readings above 50 signal expansion.

“China’s economy is sustaining and it’s not going down any further,” Tetsu Emori, a senior fund manager at Astmax Asset Management Inc. in Tokyo, said by phone. “The U.S. market is still good. The underlying conditions of the market are improving, that is clear.”

China will account for about 11 percent of global oil demand this year, compared with 21 percent for the U.S., according to the International Energy Agency in Paris.

In the U.S., crude stockpiles probably declined by 2.5 million barrels in the week ended June 27, a Bloomberg survey showed before data from the Energy Information Administration tomorrow. Supplies expanded by 1.74 million to 388.1 million through June 20, the first increase in four weeks, according to the Energy Department’s statistical arm.

Tropical Depression One was stationary off the east of Florida after forming yesterday, the U.S. National Hurricane Center said in an advisory on its website. The system, packing maximum sustained winds of 35 miles (56 kilometers) per hour, is forecast to strengthen to become Tropical Storm Arthur later today.

--With assistance from Heesu Lee in Seoul, Ann Koh in Singapore and Ben Sharples in Melbourne.