Crude rises 39 cents to $66.85 a barrel after scaling $67 a barrel.
Brent crude oil touched $67 a barrel in intraday trade on Monday, its highest in 2015, as dismal Chinese factory activity enhanced expectations the world’s second-largest economy would roll out stimulus measures to arrest a slowdown.
The North Sea crude variety rose 39 cents to $66.85 a barrel by 1046 GMT, having scaled the 2015 peak of $67 earlier in the session. US crude, which had hit its highest this year at $59.90 per barrel on Friday, inched up by 22 cents to $59.37 a barrel. Brent crude oil has surged by over 40% from an almost six-year low of $45.19 in January on expectations of a tighter demand-supply balance and tension in West Asia.
The latest data showing that activity at Chinese factories declined at its fastest pace in a year in April bolstered the case for policy stimulus by the communist government, which has been facing a tough challenge to bring the economy back into shape from its worst slowdown since 1990.
However, analysts awaiting a cut in oil supplies by Opec to pronounce a sustained uptick in the prices. That the supply in the global market is still robust can be gauged from higher Libyan exports, record outbound shipments by Iraq in April and Opec oil output at its highest in two-and-a-half years.
Crude oil prices dropped sharply last year as a spike in US shell drilling resulted in the largest inventory at least in three decades, especially in view of poor demand, while the Opec showed reluctance to cut output, effectively declaring a price war not to cede market share to those outside the West Asian oil cartel. Brent crude dropped 48% to end the year at $57.33 per barrel, while the WTI crude also lost by around a half.
China-specific commodities rally
China-focussed commodities — including copper, rubber, iron ore and nickel — rallied in intraday trade on Monday by up to 6%, thanks to the buzz about fresh stimulus.
In China, copper inched up by nearly 4%, rubber rallied by as much as 6%, iron ore by 3.8% and nickel by 3.4% intraday. The board-based commodity rally in the wolrd’s largest consumer of base metals was also aided by a return of investors from a holiday weekend. Chinese markets were closed on Friday for a public holiday.
A statement by Vale late last week that it could cut iron ore production by up to 30 million tonne over the next two years helped drive up the prices. BHP Billiton also recently announced that it could delay an Australian port project that would have raised its production by 20 million tonnes, in increasing signs that producers may cut output or hold expansion plans to shore up the commodity prices.