SINGAPORE: Brent crude was steady above $108 a barrel on Thursday, holding on to the previous day's gains, after a surprisingly strong reading on Chinese manufacturing bolstered hopes for higher demand in the world's second-biggest oil consumer.
China's factory sector expanded at its fastest pace in 18 months in July, as a raft of government stimulus measures kicked in, a preliminary HSBC survey showed on Thursday.
"China is a big commodities player, and this is definitely positive for oil," said Avtar Sandu, senior commodities manager at Phillip Futures in Singapore. "Equities have moved higher, so this is a number everybody is happy about," he said.
Brent crude for September delivery traded up 10 cents at $108.13 a barrel by 0321 GMT, after closing 70 cents higher. US crude for September delivery was down 2 cents at $103.10.
The contract had settled 73 cents higher on Wednesday. Prices pushed higher on Wednesday after US government data showed crude stocks fell more than expected by 4 million barrels last week. Analysts had expected a decrease of just 2.8 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub fell 1.5 million barrels, data from the Energy Information Administration showed.
However, a build of 5 million barrels in combined inventories of gasoline and distillates raised questions about demand. Japanese and South Korean oil refiners have purchased the first condensate cargoes to be exported from the United States since the easing of a 40-year ban on US oil exports, industry sources familiar with the matter said on Thursday.
Amid booming shale oil production, the United States recently softened a total ban on oil exports in place since the Arab oil embargo of the 1970s.
US crude's discount to Brent dropped as low as $4.51 on Wednesday, near a three-month low, as high domestic refinery utilization rates signalled strong near-term demand for crude oil and low inventories at the Cushing, Oklahoma, delivery hub.
The spread had widened to $4.91 a barrel by the end of the day as traders covered short positions ahead of the close, and was $5.05 a barrel on Thursday.
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