Oil rises on positive economic data from China, U.S.
Oil prices rose Thursday on encouraging data on China's manufacturing activity and U.S. unemployment.
The March crude contract rose by as much as $1.52 on the New York Mercantile Exchange but retreated from that high to close with a gain of 72 cents at $95.95 US a barrel after falling $1.45 on Wednesday.
Yesterday's decline came after crude shipments through the Seaway pipeline from Cushing, Oklahoma, to refineries on the Gulf Coast had to be cut to less than half because of limited endpoint capacity. Traders were encouraged by speculation today that the pipeline will soon return to operating at full capacity.
Manufacturing in China, the world's second-biggest economy, crept higher in January to the fastest pace in two years, according to a preliminary version of HSBC's monthly purchasing managers' index.
The index rose for the fifth month in a row to 51.9 in January from 51.5 in December. Readings above 50 on the 100-point scale indicate an expansion.
Oil prices were boosted as well by a report showing the number of Americans seeking unemployment aid fell last week to the lowest level in five years.
That's seen by traders as a sign that employers are cutting fewer jobs and may step up hiring.
The Labor Department said Thursday that weekly unemployment benefit applications dropped 5,000 to a seasonally adjusted 330,000.
Prices rose despite the latest report this morning from the Energy Department on U.S. oil supplies, which showed crude inventories rose by 2.8 million barrels last week. Analysts surveyed by Platts had expected an increase of closer to two million barrels.
Chinese factories add employees
The HSBC report is further evidence that China's economy is undergoing a modest recovery from a downturn sparked by the 2008 world financial crisis.
HSBC's chief China economist, Qu Hongbin, said that gains in new business allowed manufacturers to step up production by adding jobs and making more purchases.
"Despite the still tepid external demand, the domestic-driven restocking process is likely to add steam to China's ongoing recovery in the coming months," Qu said.
HSBC's index is based on responses from 85 to 90 per cent of purchasing executives surveyed at 420 manufacturers. The full version is due by Feb. 1.
While domestic demand is holding up, demand for shipments of goods like clothes, toys and electronics is more uncertain because of a weak U.S. recovery and austerity measures in Europe.
Export-driven manufacturing employs millions of Chinese workers, though the country's reliance on trade has lessened as domestic consumption has grown.
With files from The Canadian Press and The Associated Press