Upbeat U.S., China data boost prospects for oil demand
By Myra P. Saefong, MarketWatch
TOKYO (MarketWatch) -- Crude-oil futures climbed Monday morning in Asia to top $80 a barrel for the first time in more than a month, extending last week's strength, with traders upbeat about the prospects for oil demand from the world's two biggest energy consumers.
"Oil prices are benefitting from positive economic data and from a tightening global market balance," analysts at Credit Suisse said in a research note issues Monday.
Crude for March delivery climbed to a high of $80.51 a barrel in electronic trading on Globex, its strongest intraday level since mid-January, according to data from FactSet Research. The contract was up 69 cents at $80.50 by the late morning in Tokyo.
The March contract, which expires at the end of Monday's trading session in New York, had closed Friday with a gain of 0.9% to end the holiday-shortened week 7.7% higher after the Labor Department estimated that the consumer price index rose a seasonally adjusted 0.2% in January for the fifth straight month. See Friday's Futures Movers.
Oil traders have been eyeing data for hints on oil demand, and figures from the U.S. and China are looking good.
The sale of highway diesel is a good indicator for U.S. economic activity, "and it has begun to recover some," said Charles Perry, president of Perry Management, an energy-consulting firm. Perry said highway diesel is a key measure of truck and rail activity.
Given that, "I suspect crude prices will rise some more, responding to the economy in general," Perry said.
Meanwhile, Telvent DTN senior analyst Darin Newsom said a recent rebound in U.S. shares has also boosted sentiment toward crude.
"Non-commercial traders are adding to their net-long futures position," Newsom said, with those moves tied to the rally in the Dow Jones Industrial Average (INDU 10,402, +9.45, +0.09%) .
"Seasonally, the market tends to rally 34% from mid-February through mid-July, so [the early rally Monday in Asia] could be tied to commercial buying in front of expected seasonal increase in demand," he said.
"However, until the spot-month futures contract moves above previous high of $83.95, it remains vulnerable to longer-term pressure," he said.
China boost
Also contributing to crude's price gain Monday in Asia were reports that China increased the volume of oil it processed in January.
China, the world's second-largest energy consumer, saw its crude-processing volume climb 29% year-on-year in January to 30.14 million metric tons, according to a Bloomberg News report, citing data from the China Petroleum & Chemical Industry Association.
The China data show "sizeable growth," said Patrick Kerr, a managing director at Amerifutures Commodities & Options.
The United Nations also said China's economy is now expected to growth four times faster than the U.S. economy in 2010, he said, adding that China's oil demand for 2010 is also now expected to increase by 5% for the year compared to a 3.7% rise in the prior year.
"Look for more follow through to the upside [for oil prices], with plenty of volatility," Kerr said.
