Brent crude oil rose towards $50 a barrel yesterday as a drawdown in US crude oil stocks outweighed the negative impact of weak economic manufacturing data from China.
The American Petroleum Institute said US crude stockpiles fell 3.7 million barrels last week, with stocks at the Cushing, Oklahoma, delivery point for US crude futures down almost 500,000 barrels.
Although total US oil inventories are at record highs, the draw suggests a rebalancing of the biggest domestic oil market is under way as oil production slows in the face of low prices.
Benchmark Brent for November was up 50 cents a barrel at $49.58 in afternoon trading. US light crude for November traded up 30 cents at $46.66.
The US industry data helped oil resist the negative impact of a sharp contraction in Chinese manufacturing, which darkened the outlook for the world economy. Flagging demand is dragging China’s factory sector into its sharpest contraction in 6½ years, a private survey showed yesterday , triggering a flight to safety in Asian markets that analysts say could extend across the globe.
The Caixin/Markit China Manufacturing Purchasing Managers’ Index fell to 47.0 in September, its lowest since March 2009. Levels below 50 show a contraction.
Oil prices have been weak for over a year and are now less than half their peak levels in 2014 thanks to massive oversupply by oil producers in the Middle East and North America.
Some analysts say oil prices could be about to recover, particularly if official US government figures confirm that the oil market there is starting to tighten. The US Energy Information Administration (EIA) is preparing to publish its figures.
“If the EIA confirms the crude draw this afternoon, the market could go even higher,” said Tamas Varga, analyst at London brokerage PVM Oil Associates. “It is now not unreasonable to expect higher prices.” – (Reuters)
