Energy Commodities Price Watch: PMI Data from China and Eurozone Supporting Oil

on Aug 23, 2013
Listen Friday, August 23rd: Brent crude today hovered around $110 (£70.63) a barrel as positive data from China and Europe boosted hopes for stronger demand from two of the world’s largest energy consuming regions. Limited oil exports from Libya resulting from social unrest in the African country supported the price increase. US Fed’s intentions to taper its quantitative easing programme were reiterated in the minutes of the central bank’s July meeting earlier this week, preventing crude prices from rising even higher today. Natural gas climbed to a four-week high after the Energy Information

Administration (EIA) announced weaker-than-expected increase in the amount of gas in storage.

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**News from China, Eurozone and Libya support crude prices**

A preliminary survey showed that during August China’s manufacturing activities have expanded for the first time in four months. HSBC Flash China Purchasing Managers’ Index for the month is up 5 percent to 50.1. The strong reading indicating expansion of the economy comes after the index settled at 47.7 in July, an 11-month low.
Survey compiler Markit’s Flash Purchasing Manager Index for August has shown that business activity in the Eurozone is picking up. The 51.7 reading for August has surpassed all predictions in a Reuters poll in which the median analyst forecast was for a reading of 50.9. Readings above the 50 mark indicate that economic activity is expanding.

The strong PMI readings suggest that oil demand will increase over the following months but expectations that the Federal Reserve will start slowing down its commodities-friendly bond-purchasing programme from next month are slowing down the advance in crude prices.
Libya has also had a strong impact on oil prices as some of the country’s major oil terminals had to be closed down due to labour protests. Libya’s Marsa al Brega port, which reopened on Tuesday, will be able to handle oil exports in the next couple of days, an industry source has said.

“Brent is seeing some correction, but prices are still caught in the range of $108.20 and $111,” said
Yusuke Seta, commodity sales manager at Newedge Japan, as quoted by Reuters.
Brent futures for October settlement opened at $110.24 (£70.77) a barrel, 0.31 percent up. The crude was trading at $110.18 (£70.51) a barrel as of 12:59 BST on the New York Mercantile Exchange.

WTI for October delivery gained as much as 40 cents, or 0.38 percent, increasing to $104.43 (£67.57) a barrel. The benchmark crude was trading at $105.10 (£67.47) a barrel as of 13:01 BST.
**Natural gas surging on US heat wave and lower-than-forecast stockpile rise**
According to weather forecasts, a heat wave will cross the US Midwest, resulting in an increased demand for natural gas from power plants as more consumers will use air conditioners. Electricity generators account for 32 percent of America’s gas demand, according to data from the Energy Information Administration.
!m[Natural Gas Upticks on Modest Rise in U.S. Inventories](/uploads/story/5056/thumbs/pic1_inline.jpg)
US natural gas stockpiles rose by 57 billion cubic feet last week instead of the 69 billion in a survey
compiled by The Wall Street Journal. The EIA also said that natural gas inventories will reach 3,800 billion cubic feet by October 31 which is the usual level for that time of year. Total injections for the summer will be similar to the 2008-11 levels but still much higher than in 2012 when a record-warm winter left very high end-of-season inventories, the EIA said.
The price of natural gas for September delivery today increased as much as 0.47 percent to $3.562 (£2.28) per million British thermal units before retreating to $3.524 (£2.26) per million British thermal units as of 13:18 BST in New York.

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Energy Commodities Price Watch: Oil Prices Extend DeclineEnergy Commodities Price Watch: Oil Drops on Fed Tapering Concerns

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