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WTI Rebounds From Two-Week Low on China Manufacturing

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Aug. 22 (Bloomberg) -- West Texas Intermediate crude rebounded from the lowest price in almost two weeks after a report showed manufacturing unexpectedly expanded in China, the world’s second-largest oil consumer.

Futures gained as much as 0.8 percent, snapping a three-day decline, after an index of Chinese manufacturing rose in August from the lowest in 11 months. U.S. crude stockpiles shrank by 1.4 million barrels last week, according to an Energy Information Administration report. Libya’s Brega oil terminal lifted its force majeure, a legal clause allowing the suspension of exports, an oil ministry official said.

“The Chinese figures were positive,” said Thina Saltvedt, an analyst at Nordea Bank AG in Oslo. “China will be the most important thing for commodities, as the uncertainty about it is bigger than for the euro zone. I’m optimistic, in that I expect stable growth, though at a lower rate.”

WTI for October delivery advanced as much as 87 cents to $104.72 a barrel in electronic trading on the New York Mercantile Exchange and was at $104.06 as of 1:12 p.m. London time. The volume of all futures traded was about 38 percent below the 100-day average. The contract fell $1.26 to $103.85 yesterday, the lowest close since Aug. 8.

Brent for October settlement was 8 cents higher at $109.89 a barrel on the London-based ICE Futures Europe exchange. The European benchmark was at a premium of $5.82 to WTI. The spread was $5.96 yesterday, the widest since June 26.

Chinese Manufacturing

The preliminary August reading of 50.1 for a Chinese Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 47.7 in July. The number exceeded all 16 estimates in a Bloomberg News survey and was the first since April at above the 50 mark that divides contraction from expansion.

Domestic demand led the gain after Premier Li Keqiang rolled out measures to support growth, including tax breaks for small businesses and an increase in railway investment. An index of export orders slid at a faster pace, indicating limits on the boost that China can expect from overseas orders as the U.S. Federal Reserve considers winding back stimulus.

“Almost all committee members agreed that a change in the purchase program was not yet appropriate,” and a few said “it might soon be time to slow somewhat the pace of purchases as outlined in that plan,” according to the record of the Federal Open Market Committee’s July 30-31 gathering released yesterday in Washington.

Libya Strike

Members of Libya’s Petroleum Facilities Guard who have seized control of the main oil ports, including Es Sider, the country’s largest, and are on strike “number in the hundreds only,” Walid Hassan, a spokesman for the PFG, said in an interview yesterday from Tripoli. The PFG is an 18,000-strong unit of the nation’s military force.

Their protest cut crude output to less than half the 1.6 million barrel-a-day level pumped before the 2011 revolution which ousted Muammar Qaddafi, costing the economy at least $1.6 billion, Oil Minister Abdulbari Al-Arusi said on Aug. 15.

A methanol tanker was given authorization to berth at Brega, Oil Ministry Inspection and Measurement Director Ibrahim Al Awami said in an interview in Zawiya.

U.S. gasoline inventories dropped by 4 million barrels in the week ended Aug. 16, said the EIA, the Energy Department’s statistical arm. That’s the biggest decline since April 2012. Supplies were forecast to decrease by 1.5 million, according to the median estimate of 11 analysts surveyed by Bloomberg News.

Crude inventories at Cushing in Oklahoma, the largest U.S. oil-storage hub and the delivery point for WTI contracts, slid 1.1 million barrels to 37.4 million, according to the EIA. Supplies shrank for a seventh week, the longest stretch since September 2011.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net