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Crude Oil Rises to Seven-Week High on China, U.S. Economic Data

Crude Oil Trades Near Seven-Week High on Economic Optimism
Oil traded little changed near a seven-week high after U.S. second-quarter gross domestic mproduct and weekly jobless claims beat economists’ estimates in signs that demand may improve. Photographer: Dennis Drenner/Bloomberg

Oil rose for a third day, headed for its biggest weekly gain since April, after economic data from the U.S. and China bolstered optimism that demand is growing in the world’s two largest consumers of the fuel.

Futures reached their highest level in more than seven weeks as China’s purchasing managers’ index rose in September at the fastest pace in four months, according to a report today. The U.S. government yesterday reported economic growth and a decline in jobless claims that exceeded forecasts. Oil also rose after OPEC member Ecuador declared a state of emergency after what it called a “coup attempt” yesterday.

“The Chinese data spurs hopes of continued strong oil demand in the second largest consuming country,” said Carsten Fritsch, a Commerzbank AG analyst in Frankfurt. “The reaction to the Ecuador news is unwarranted, but in a bullish environment, it is an argument to buy.”

Oil for November delivery climbed as much as $1.18, or 1.5 percent, to $81.15 a barrel on the New York Mercantile Exchange, the highest price since Aug. 10. It was at $80.90 at 1:09 p.m. London time. Brent crude for November settlement was up $1.06, or 1.3 percent, at $83.17 a barrel.

China’s purchasing managers’ index climbed to 53.8 from 51.7 in August, the logistics federation and statistics bureau said today. The median forecast from 15 economists surveyed by Bloomberg News was 52.5. Readings above 50 indicate expansion.

Emergency in Ecuador

Ecuador, the smallest oil producer in the Organization of Petroleum Exporting Countries, declared a state of emergency after what it called a “coup attempt” yesterday by members of its security forces. President Rafael Correa was freed in a military raid on a hospital where police held him captive as part of a wage dispute.

Crude may rise next week on speculation that U.S. inventories will drop as the economic rebound accelerates, a Bloomberg News survey showed. Fifteen of 36 analysts, or 42 percent, forecast crude oil will increase through Oct. 8. Thirteen respondents, or 36 percent, predicted a decline, and eight estimated prices will be little changed.

Futures gained 11 percent in September and 5.7 percent in the third quarter. This week, the market is up 5.8 percent, the most since the five days ended April 2.

U.S. initial jobless claims decreased by 16,000 to 453,000 in the week ended Sept. 25, Labor Department data showed yesterday. That’s lower than the median estimate of 460,000 from 47 economists polled by Bloomberg News. Unemployment hovered around 10 percent.

Manufacturing Data

The U.S. economy grew at a 1.7 percent annual rate in the second quarter, revised figures from the Commerce Department showed yesterday. The revised GDP figure exceeded the 1.6 percent median forecast in a Bloomberg News survey.

Business activity in the U.S. also beat the highest estimate from economists in a Bloomberg News survey. The Institute for Supply Management-Chicago Inc. yesterday said its business barometer climbed to 60.4 in September.

Oil prices could rise further if a U.S. manufacturing report later today shows “an upside surprise” by beating economists’ estimates, according to Fritsch.

The Institute for Supply Management’s factory index, due to be reported at 10 a.m. New York time, fell to 54.5 from 56.3 in September, according to the median estimate of 83 economists surveyed by Bloomberg News. Readings above 50 signal growth.

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