China's latest economic update showed manufacturing activity expanded for the first time in six months, adding another bullish sign to the oil market.
The Purchasing Managers' Index in March was 50.8, up from 49.1 in February, Reuters reported, adding that export orders also increased.
“Indicators show that domestic supply and demand conditions are improving, homeowner and business confidence has recovered, and consumption and investment appetite are increasing,” Zhou Maohua, an analyst at China Everbright Bank, told Reuters. “
Sure enough, even though several markets were closed this Monday for the Easter holiday, oil prices started to rise on the back of Chinese data, extending their gains from last week.
Oil prices have now risen for three consecutive months and could continue to rise. Besides OPEC+ production cuts, among the factors driving the increase in crude oil supplies is Russia's intention to combine production cuts under the OPEC+ agreement to focus on reducing oil output rather than exports, as it did last month. This may be due to a decrease in supply from Russia.
Meanwhile, about 1 million barrels of Russia's refining capacity has been shut down as a result of the Ukraine attack, Reuters said in a report in Energy Aspects magazine. “This further reinforces the strong demand fundamentals in the second quarter.”
One of the new factors driving the price increase is demand, especially in Europe. Goldman Sachs analysts said European oil demand turned out to be stronger than expected, with production falling by 200,000 barrels per day in February compared to the same month a year ago, in stark contrast to the bank's forecast for a contraction of 200,000 barrels per day. It reported an increase of 100,000 barrels.
Demand from China appears to remain expected to be weak, but the latest PMI readings could lead to a revision of demand forecasts for the world's largest importer of the commodity.
Written by Charles Kennedy, Oilprice.com
Other top articles on Oilprice.com:
