Oil prices extended gains for a second session on Wednesday after a strong jump in manufacturing in China, the world’s top crude importer, boosted the outlook for global fuel demand.
Brent crude futures for May rose 45 cents, 0.5%, to US$83.90 a barrel at 0800 GMT. U.S. West Texas Intermediate (WTI) crude for April gained 42 cents, or 0.6%, to US$77.47 a barrel.
Oil prices continue to be supported by expectations for a strong rebound in demand in China, the world’s second-largest crude consumer.
“Another round of upside surprise in China’s PMI further provides conviction of a stronger-than-expected recovery, which supports a more optimistic oil demand outlook,” said Yeap Jun Rong, market strategist at IG.
“That provided a much-needed catalyst for oil prices to tap on for some relief following (Monday’s) previous sell-off, with China’s recovery showing to be on track to cushion some of the global demand weakness from hawkish central banks,” Yeap added.
Data showed China’s factory activity rose for the first time in seven months in February, according to the purchasing manager’s index (PMI) published by Caixin/S&P Global on Wednesday.
Official government PMI data also published on Wednesday showed the fastest expansion in manufacturing since 2012 occurred in February.
However, the strong demand signal was offset by signs of rising crude stockpiles in the United States, the world’s biggest oil consumer and producer.
U.S. oil inventories rose by 6.2 million barrels in the week ended Feb. 24, according to market sources citing American Petroleum Institute (API) figures on Tuesday.
Still, gasoline inventories declined by 1.8 million barrels and distillate fuels, including diesel and jet fuel, dropped by 340,000 barrels, according to the API data.
Official U.S. government data on stockpiles is due later on Wednesday.
That data is forecast to show a 10th consecutive week of builds, with analysts in a Reuters poll expecting that a rise of nearly half a million barrels occurred last week.
Other signs of rising supply were seen from data on the Organization of the Petroleum Exporting Countries (OPEC).
In February, OPEC pumped 28.97 million barrels per day (bpd), a Reuters survey found, up by 150,000 bpd from January. Output is still down more than 700,000 bpd from September.