SINGAPORE: Brent crude reversed early losses to edge up towards $85 a barrel on Thursday as better than expected factory data from China countered concerns over rising supply.
China's manufacturing activity quickened to a three-month high in October, with the HSBC/Markit manufacturing purchasing managers' index rising to 50.4 from 50.2 in September.
China is the world's second biggest oil consumer and the expected strength of its economy is a key factor in judging oil demand outlook.
"It's above 50 percent so that may be part of the strength (in oil). Their GDP number was not too bad," said Tony Nunan, an oil risk manager at Mitsubishi Corp in Tokyo.
While data on Tuesday showed China's economy grew at its slowest pace since 2009 in the third quarter at 7.3 percent, it was slightly above market forecasts of 7.2 percent.
Brent crude for December delivery rose 13 cents to $84.84 a barrel by 0644 GMT, after hitting a one-week low of $84.23 earlier. The benchmark dropped $1.51 on Wednesday, its biggest daily loss in more than a week.
U.S. front-month crude was up 7 cents at $80.59 a barrel. Front-month West Texas Intermediate fell more than $2 on Wednesday, also its steepest drop in just over a week.
"But it's still not good for oil with too much supply. The question is whether we have come down far enough," Nunan said.
U.S. crude inventories surged by 7.1 million barrels last week to 377.68 million barrels, more than double the 2.7-million-barrel increase that analysts had forecast, data from the Energy Information Administration showed.
SHALE GROWTH
A weak outlook for the global economy along with excess supplies have weighed on Brent, which has shaved more than a quarter of its value from mid-June, when it hit this year's peak of $115.71.
"Certainly there's quite a bit of oil hanging around, with rapid growth in key shale production areas," saidPhin Ziebell, an economist at National Australia Bank.
"But I think a key driver this winter could be the U.S. if a cold winter could slow down some production as it becomes harder to extract."
About a third of U.S. shale output would be uneconomical if oil prices fell to $80 per barrel, BernsteinResearch analysts said this week, differing widely from the International Energy Agency's estimate of a little over 4 percent.
Amid slack oil demand and rising supply, pressure is mounting for OPEC to cut output during its Nov. 27 meeting to support prices.
The Organization of the Petroleum Exporting Countries has to reduce oil output by at least 500,000 barrels per day (bpd) to curb oversupply of about 1 million bpd, Libya's OPEC governor Samir Kamalsaid.
So far, Libya is among a minority, and the only one of four African OPEC members, calling for an OPEC cut.
Top OPEC producer Saudi Arabia has sent signals it is comfortable with markedly lower oil prices.
Comments
Comments are closed for this article.