Brent crude rose on Monday, lifted by strong manufacturing data in No 2 oil consumer China while US crude jumped in heavy spread trading. US crude surged more than 4 percent, outpacing Brent and putting the US into backwardation, where the front-month price exceeds the prices further out.
The stronger US gains narrowed Brent's premium to its US counterpart to under $20 a barrel intraday as trading volume for US crude more than doubled the volume for Brent. US volume totalled more than 1 million lots and was 60 percent above its 30-day average. Brent volume was 33 percent below its 30-day average. Dollar-denominated crude prices got a boost from a weak dollar, which fell near a record low against the yen and to a six-week low versus the euro.
Adding lift were headlines that Turkish tanks and armoured vehicles crossed into northern Iraq heading in the direction of a Kurdish militant camp. China's manufacturing sector expanded in October, snapping three months of contraction, according to the HSBC purchasing managers' index (PMI).
"The Chinese PMI number is better than expected and that is one of the main reasons for the rise," Christophe Barret of Credit Agricole said. "Prices are volatile so the price could be corrected later in the day." "There is still much uncertainty around talks for a solution to the eurozone debt crisis and we are waiting for something more clear to emerge from the meetings," he added.
ICE Brent December crude rose $1.89 to settle at $111.45 a barrel, highest close since October 14, having reached $111.60 and nearing front-month Brent's 100-day moving average of $111.77. US December crude rose $3.87 to settle at $91.27 a barrel, the highest close since August 3. It marked a second straight session of gains, and US crude eclipsed the front-month 100-day moving average of $89.98.
Recent slides in US crude stocks, especially at the key oil hub at Cushing, Oklahoma, delivery point for the New York Mercantile Exchange's light sweet crude contract, and expectations that Libyan exports will continue to increase, were cited as factors providing US crude its added strength.
US stocks rose, adding to three weeks of gains for the S&P 500 index, on strong earnings from Caterpillar and some proposed acquisitions. Oil and equities prices were bolstered after European Union leaders made some progress towards a strategy to fight the region's sovereign debt crisis on Sunday.
But investor caution was warranted because final decisions were deferred until a second summit on Wednesday and sharp differences remain over the size of losses private holders of Greek government bonds will have to accept. Also helping limit Brent's price rally was news that the eurozone's private sector tipped further into decline in October, according to business surveys that showed the region is in serious danger of moving into recession.
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