LONDON: Oil rose on Friday to $81, a seven-week high, boosted by stronger-than-expected US and Chinese economic data which raised hopes of demand recovery in the world’s largest consumers.
China’s manufacturing sector gathered momentum last month, the official purchasing managers index (PMI) showed, providing further evidence that an important engine of global growth is humming again after sputtering in the second quarter.
US crude for November was up $1 at $80.97 a barrel at 1116 GMT, adding to an 11.2 percent gain in September, the largest monthly jump since May 2009. It earlier hit $81.08, its highest level since around mid-August. ICE Brent for November was up 89 cents at $83.20 a barrel.
"(The data is) indicating that we’ve had no slowdown in recent economic activity so that’s very supportive, because China is the main source of growth for oil demand in the foreseeable future," Christophe Barret, oil analyst at Credit Agricole, said.
China’s financial markets are closed for a week from Oct. 1 to 7 for the National Day holiday.
In the United States, data on Thursday showed new jobless claims fell last week, regional manufacturing grew faster than expected and consumer spending was stronger than expected.
The market will be watching out for the Institute for Supply Management US September manufacturing index, due later on Friday. Economists in a Reuters survey expect a reading of 54.5 versus 56.3 in August.
"Any return to stronger numbers — or a better-than-expected set of figures — would bring in more buying, we would expect," Peter Beutel, president of US trading advisory Cameron Hanover, said in a note.
Upward pressure
The International Energy Agency, which advises industrialized nations on energy policy, said on Friday it sees upward pressure on oil prices in the second half of 2011 due to a projected decline in oil stocks.
Oil prices have remained relatively stable so far this year, trading two-thirds of 2010 at between $70 and $80 per barrel, a range that oil producers in the Organization of the Petroleum Exporting Countries have said they favor.
"In the short term … probably yes (price above $80 is sustainable) given bullish market environment momentum, a weaker dollar, technicals and the latest economic news from China," Carsten Fristch at Commerzbank said.
"But in the mid to long term, meaning next month or so, probably not as the fundamentals don’t justify prices beyond $80 at the moment. They haven’t really changed only market sentiment has changed."
The oil market has spent much of the year in lockstep with equities and negatively correlated to the US dollar.
The dollar was down 0.59 percent against a basket of currencies. A weaker dollar increases the purchasing power of non-US dollar currency holders. The pan-European FTSEurofirst 300 index of top shares was 0.29 percent higher. –Additional reporting by Florence Tan in Singapore
