Oil Rises on Stimulus Speculation

Oil rose on speculation central banks will take more steps to boost growth after manufacturing unexpectedly contracted in China.

Prices gained as much as 0.9 percent as equities rallied amid expectations that policy makers would enact stimulus measures to spur expansion. China’s Purchasing Managers Index shrank for the first time in nine months in August, a government survey showed Sept. 1. China is the world’s second-largest oil-consuming country after the U.S.

“The disappointing data from China emphasizes that waiting for central bank action is the name of the game,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt who predicts prices will stay above $90 a barrel this month. “Speculation of central bank intervention will keep prices supported despite bearish fundamentals of weak demand and abundant supplies.”

Crude for October delivery increased 58 cents, or 0.6 percent, to $97.05 a barrel at 1:15 p.m. in electronic trading on the New York Mercantile Exchange. Earlier, it touched $97.30, the highest intraday level since Aug. 27. Prices have climbed 26 percent since reaching the year’s low of $77.28 on June 28. They advanced 9.6 percent in August, a second monthly gain.

Floor trading in New York is closed for the U.S. Labor Day holiday. Electronic trading halted at 1:15 p.m. without a settlement and will resume at 6 p.m., exchange owner CME Group Inc. said on its website. Transactions since electronic trading opened yesterday will be dated tomorrow.

Brent Settlement

Brent oil for October settlement rose $1.21, or 1.1 percent, to end the session at $115.78 a barrel on the London-based ICE Futures Europe exchange. Prices advanced 9.2 percent last month. The European benchmark grade’s premium to West Texas Intermediate was at $18.73, compared with $18.10 on Aug. 31.

New York oil has technical support at $95.76 a barrel, along the bottom of an uptrend channel on the daily chart, according to data compiled by Bloomberg. This channel started from the 2012 intraday low of $77.28 on June 28. Buy orders tend to be clustered near chart-support levels.

China’s Purchasing Managers Index fell to 49.2 in August from 50.1 in July, the National Bureau of Statistics and China Federation of Logistics and Purchasing said Sept. 1. The figure was below the estimates of 24 of the 25 analysts in a Bloomberg survey.

A separate measure by HSBC Holdings Plc and Markit Economics today showed the fastest contraction since March 2009. The final reading for the HSBC and Markit Economics report fell to 47.6 from a preliminary figure of 47.8 from Aug. 23. The dividing line between expansion and contraction for both surveys is 50.

Stimulus Signals

China should “decisively” expand the strength of its fine-tuning in accordance with the changes in the economy and markets, People’s Daily said in a front-page essay by an unidentified commentator. European Central Bank President Mario Draghi may unveil details of his bond-purchase program after a policy meeting Sept. 6.

Federal Reserve Chairman Ben S. Bernanke said Aug. 31 that he wouldn’t rule out more stimulus to boost the economy. The Fed will implement measures as needed to spur growth, he said at the Kansas City Fed’s annual economic-policy symposium in Jackson Hole, Wyoming.

“Bernanke did say if more is needed, the Fed stands by to do more, which is good for the economy, it’s good for markets,” Markus Rosgen, chief Asian strategist at Citigroup Inc., said in a Bloomberg Television interview. “In terms of China, there is certainly more room to ease.”

Equities Rally

The Stoxx Europe 600 Index rebounded from two weeks of losses, the first back-to-back declines since May. It advanced 0.8 percent. Standard & Poor’s 500 Index futures for September rose 0.3 percent, and the MSCI World Index jumped 0.1 percent.

Oil also rose as about 58 percent of the Gulf of Mexico’s daily crude output capacity remained shut in following Hurricane Isaac. Some production has resumed from last week when about 95 percent of production was shut in, the U.S. Bureau of Safety and Environmental Enforcement reported yesterday.

The equivalent of about 804,000 barrels a day of oil output was offline as of 12:30 p.m. New York time, it said.

Production among the Organization of Petroleum Exporting Countries slipped 75,000 barrels to an average 31.988 million barrels a day last month from a revised 32.063 million in July, according to a Bloomberg survey of oil companies, producers and analysts. Output in Iran fell 350,000 barrels to 2.75 million barrels a day, the lowest level since February 1990. Saudi Arabia, the biggest producer in OPEC, pumped 9.9 million barrels a day, unchanged from July.

Net-long positions in oil held by money managers, including hedge funds, commodity pools and commodity trading advisers, in the seven days ended Aug. 28 advanced 7.2 percent, to 192,471 futures and options combined, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Aug. 31.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE