Forexpros –
Forexpros – Crude oil futures bounced higher from a weekly low as hopes that an improving U.S. economy will spark demand.
On the New York Mercantile Exchange, light sweet crude futures for delivery in May traded at USD105.77 a barrel during U.S. morning trade, adding 0.39%.
It earlier climbed to a high of 106.17 a barrel and hit a low of 105.39 a barrel earlier in the session.
The International Energy Agency stated that it isn’t planning on releasing emergency stockpiles supporting oil prices.
President Bullard of the St. Louis Fed stated during a speech in Hong Kong, “With Fed policy currently on pause, it may be a good time to take stock of whether we may be at a turning point. The outlook has improved markedly.”
This statement increased hopes of improved oil demand in the world’s largest economy.
In addition, anticipation is running high that the U.S. new home sales report, released at 10:00 a.m. New York time, will indicate an increase to 325,000 annual rate in February. This would mark the fastest growth since December, 2010, supporting oil demand increase as the economy improves.
Resulting in the oil price weakness earlier in the week, HSBC China manufacturing Purchasing Managers’ Index, which fell to a four-month low and remained in contractionary territory for the fifth consecutive month weighed on oil prices
The weak PMI data marked the latest in a string of negative headlines on China’s economic outlook.
Beijing recently downgraded its growth outlook for 2012, while investors were disturbed by a large trade deficit for February and comments this week from mining giant BHP Billiton that demand for iron ore will flatten amid a slowdown in China’s economy.
An increased slowdown in the world’s second biggest economy would impair a struggling global expansion because of the implementation of harsh austerity measures in Europe.
China is the world’s second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Further weighing on energy prices, German manufacturing activity dropped to a four-month low in March, while manufacturing in France also contracted.
A separate report showed that manufacturing activity in the euro zone slumped unexpectedly in March, remaining in contraction territory for the eighth consecutive month.
Renewed concerns over the fiscal health of debt-laden euro zone members, Spain, Portugal and Italy also weighed.
The euro zone accounted for nearly 16% of global oil consumption last year. Manufacturing numbers are used as indicators for fuel demand growth.
Prices briefly pared losses following the release of data showing that U.S. jobless claims fell to the lowest level since February 2008 last week.
Oil traders have been paying close attention to readings on U.S. employment levels for signs that people are returning to work, thus driving more and using more energy.
In addition, fears that the escalating rift over Tehran’s nuclear program could lead to an oil-export halt, a disruption to shipping traffic in the Strait of Hormuz or military conflict.
A potential loss of Iranian barrels has help underpin a 17% surge in crude prices this year, and could take the market higher when sanctions are enforced on July 1.
But some of those fears receded Wednesday after Saudi Arabia said the country can increase crude production by as much as 25% immediately if needed.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for May delivery gained 0.58% to trade at 123.86 a barrel, with the spread between the Brent and crude contracts standing at USD18.09.
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