Oil creeps above $104 as China factories ramp up
A rebound in manufacturing in China and Europe and falling U.S. stockpiles of crude pushed the price of oil above $104 a barrel Thursday as traders braced for the Federal Reserve to start phasing out its monetary stimulus.
By early afternoon in Europe, benchmark oil for October delivery was up 25 cents to $104.10 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped $1.26 to close Wednesday at $103.85.
The eurozone’s purchasing managers’ index, a key gauge of growth in both the manufacturing and services sectors, rose to 51.7 points in August from 50.4 in July, according to financial information company Markit. It was the highest reading since June 2011 and supported expectations that the eurozone’s recovery from recession is gaining momentum.
HSBC Corp. said the preliminary version of its monthly PMI for Chinese manufacturing rose to 50.1 for August, a sharp improvement from July’s figure of 47.7.
The figures helped divert investors’ attention away from the question of when the Fed will begin to reduce its monetary stimulus.
The program was intended to push down interest rates and spark investment, but also weighed on the dollar’s value. The dollar has crept up in recent days amid expectations that the Fed will gradually reduce its purchases of Treasurys and other bonds.
Michael Hewson of CMC Markets said the rise in the dollar has kept pressure on oil prices.
When the dollar rises, oil gets more expensive for foreign currency holders and thus losses some of its investment appeal. On Thursday, the euro was down at $1.3311 from $1.3358 late Wednesday in New York.
Falling U.S. crude inventories, which suggest stronger demand for oil, also helped support prices. For the week ended Aug. 16, stockpiles of crude fell by 1.4 million barrels to 359.1 million barrels, according to the Energy Department’s Energy Information Administration. Gasoline stocks declined by 4 million barrels last week.
Elsewhere, Brent crude, which sets prices for imported oil used by many U.S. refineries, was up 2 cents to $109.83 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Heating oil added 0.42 cents to $3.0857 per gallon.
— Natural gas rose 3.6 cents to $3.496 per 1,000 cubic feet.
— Wholesale gasoline gained 0.63 cents to $2.8247 per gallon.
Pamela Sampson in Bangkok contributed to this report.