Forexpros – Crude oil futures erased losses in choppy trade on Monday, bouncing off a six-week low following the release of a report showing that manufacturing activity in the U.S. rose at a faster rate than expected in March.
On the New York Mercantile Exchange, light sweet crude futures for delivery in May traded at USD103.39 a barrel during U.S. morning trade, easing up 0.35%.
It earlier fell by as much as 1.1% to trade at USD102.08 a barrel, the lowest since February 16.
Oil prices rebounded after the U.S. Institute for Supply Management said its index of purchasing managers rose by 1.0 point to 53.4 in March, up from a reading of 52.4 in February.
Analysts had expected the ISM index of purchasing managers to rise by 0.6 points to 53.0.
The Production Index increased 3.0 points from February’s reading of 55.3 to 58.3 and the Employment Index increased 2.9 points to 56.1, the highest since June 2011.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand. Investors often use manufacturing numbers as indicators for future fuel demand growth.
Prices were under pressure earlier in the day as concerns over the global economy lingered following the release of a pair of conflicting reports on Chinese manufacturing activity and downbeat euro zone data.
The state-affiliated China Federation of Logistics and Purchasing said Sunday that its purchasing managers index rose 2.1 points to an 11-month high of 53.1 in March, up from February’s 51.0. A reading above 50 signifies expansion.
However, a separate report from HSBC showed that manufacturing activity in the Asian nation contracted for the fifth consecutive month and recorded its lowest average reading in three years during the first quarter.
The HSBC PMI dipped to a four-month low of 48.3 last month, down from 49.6 in February.
The conflicting data was not enough to ease concerns about a potential hard landing for the world’s second biggest economy.
China is the world’s second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Lingering speculation about strategic-supply releases also weighed on prices. Global financial service provider Barclays said in a report earlier that, “While the exact timing and quantity of the release remains an unknown, a strategic stock release of some sort – within or without the auspices of the International Energy Agency – seems highly likely over the next few months.”
Speculation concerning the release of emergency oil supplies from several developed countries contributed to the bearish tone that gripped the oil market during most of the last week.
Meanwhile, markets continued to monitor tensions between Iran and the West and a potential disruption to oil supplies from the region.
The Obama administration said Friday that world oil supplies were sufficient to proceed with sanctions on banks in countries that import Iranian oil.
U.S. President Barack Obama was required by law to determine by March 30, and every six months after that, whether the price and supply of non-Iranian oil are sufficient to allow consuming nations to “significantly” cut their purchases from Iran.
Obama’s decision cleared the way for the imposition of congressionally mandated sanctions, according to a memorandum released by the White House.
The law allows banks that settle petroleum-related transactions through Iran’s central bank to be cut off from the U.S. banking system.
The stand-off between Iran and Western countries has dominated sentiment in the oil market in recent months.
There are 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, which could send oil prices skyrocketing.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for May delivery was up 0.17% to trade at 123.09 a barrel, with the spread between the Brent and crude contracts standing at USD19.70.
