Oil gains for first time in five days on upbeat China data

Oil prices rose for the first time in five days as positive Chinese trade data surpassed analysts expectations, fueling optimism about improvement in the Chinese economic activity.

On the New York Mercantile Exchange, WTI crude for September delivery traded at $104.65 a barrel at 7:05 GMT, up 0.26% on the day. Prices ranged between days high and low of $104.96 and $104.14 a barrel respectively. Light, sweet crude slipped 1.20% on Wednesday, extending current weeks decline to 2% after gaining 2.13% the preceding five-day period.

Meanwhile on the ICE, Brent oil for delivery in September rose to $107.60 a barrel at 7:05 GMT, up 0.15% on the day. Futures held in range between days high and low of $107.86 and $107.21 a barrel respectively. The European benchmark fell 0.92% on Wednesday, extending its weekly decline to 1.2% after surging 1.7% the previous week.

Oil prices received a boost on Thursday and rose for the first time in five days as the Chinese General Administration of Customs reported the countrys exports rose by 5.1% in July after contracting 3.1% in June. Expectations for a 3% climb were exceeded. Meanwhile, imports also surpassed analysts projections for a 2.1% jump and surged 10.9% last month after a 0.7% decline in June. The Chinese trade surplus narrowed to $17.82 billion from $27.10 billion a month earlier and confounded economists forecasts for an increase to $27.20 billion. Crude oil imports hit a record 6.15 million barrels per day. The Asian nation is the second biggest oil consumer and accounted for 11% of global demand in 2012.

U.S. oil inventories

Gains were however limited as mixed data from the Energy Information Administration spurred concern over oil demand in the U.S. The EIA reported on Wednesday that U.S. crude oil inventories fell by 1.3 million barrels, or 0.4%, to 363.3 millionm in the week ending August 2, below but generally in line with economists’ expectations. Refineries operated at 90.9% of their operable capacity, 0.4% below the preceding week’s 91.3%. Both gasoline and distillate fuel output intensified last week, averaging 9.6 million and 4.9 million barrels per day respectively.

The EIA also said in its report U.S. gasoline stockpiles added 100 000 barrels, or 0.1%, last week and remained above the upper limit of the average range for this time of the year. Meanwhile, distillate fuel reserves increased by 500 000 barrels and continued to stand near the lower limit of the average range. Both of the products defied analysts’ expectations.

According to a weekly Bloomberg survey of analysts, U.S. crude reserves were expected to have dropped by 1.5 million barrels to 363.1 million, the lowest level since January. Gasoline inventories were supposed to have declined by 500 000 barrels, while distillate fuel stockpiles should have remained unchanged at 126 million barrels.

David Lennox, a resource analyst at Fat Prophets in Sydney, said for Bloomberg: “Crude demand from China has remained relatively robust. The EIA numbers were a little mixed. Good numbers from China will at least stop the crude price from falling.”

Meanwhile, other fundamentals had opposing effects on oil pricing. Production of Libyas main crude grade, Es Sider, and the Amna and Sirtica grades was shut down on Tuesday due to strikes at the Es Sider and Ras Lanuf terminals. Iraqs oil exports have also declined on a year-on-year basis. At the same time, North Sea crude output is poised to surge by 11% in September.

Oil is also pressured on speculation Fed may wind down its bond purchasing program after FOMCs September meeting, as some central bankers commented recently. Fed Bank of Chicago President Charles Evans, who was one of Quantitative Easing’s supporters, said on Tuesday that there has been a “good improvement” in the labor market and indicated the central bank’s monetary easing program might be decelerated in September. FOMC’s next meeting is scheduled for September 17-18 when policy makers will review their assessment on the economic recovery pace.

Earlier in the week, Federal Reserve Bank of Dallas President Richard Fisher, one of Quantitative Easing’s critics, commented that the central bank is getting closer to tapering the monetary easing program. He said in a speech in Portland, Oregon: “Financial markets may have become too accustomed to what some have depicted as a Fed ‘put. Some have come to expect the Fed to keep the markets levitating indefinitely. This distorts the pricing of financial assets” and can lead to “serious misallocation of capital.”

Atlanta Fed president Dennis Lockhart made similar comments and Cleveland Fed President Sandra Pianalto said on Wednesday the central bank will consider reducing bond purchases if the labor market continues to improve.

Market players are now looking ahead at upcoming economic data from oils top two consumers. In the U.S., Thursday’s Initial Jobless Claims are expected to have risen by 9 000 to 335 000 in the week ending August 3. On Friday, Chinas CPI is expected to have risen to 2.8% year-on-year and 0.1% on a monthly basis. The countrys Producer Price Index should have declined by 2.2%, compared to a 2.7% contraction a month earlier. According to analysts projections, Industrial Production should have risen by 9%, while Retail Sales are expected to have surged 13.5%, compared to 13.3% in the preceding period. If the positive anticipations are confirmed, a moderate-to-strong rise in raw materials should be expected.