SINGAPORE – Brent crude edged towards $67 a barrel on Monday, reversing earlier losses after weak Chinese data reinforced views that stimulus measures would be rolled out for the world’s second largest economy.
China, the world’s second-largest oil consumer, posted its biggest drop in factory activity in a year to 48.9 in April, a private business survey showed on Monday.
The sub-50 point level indicates a contraction compared with the previous month.
The data came on the heels of a top government think tank’s forecast that China’s economic growth could slow further to 6.8 percent in the second quarter.
“The Chinese data is weaker but it seems the oil market has had a limited reaction. What the market really wants to see is supply being cut to match the demand level,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
Oil supplies from the Organization of the Petroleum Exporting Countries, which produces about 40 percent of oil supplies, climbed 0.2 percent to a more than two-year high in April, a Reuters survey showed.
Brent June crude futures rose 11 cents to $66.57 a barrel by 0711 GMT, after hitting a 2015 peak of $66.93 on April 30.
U.S. June crude gained 8 cents to $59.23 a barrel. WTI hit its highest this year at $59.90 on May 1.
Brent crude has recovered by more than 40 percent from its more than six-year low of $45.19 a barrel in January, as geopolitical tension in the Middle East, declining U.S. rig counts and a weaker dollar provided support.
Both Brent and U.S. crudes posted their biggest monthly price rise in nearly six years in April.
But the U.S. oil rig count is beginning to decline more slowly, after falling for a record 21 straight weeks to its lowest level since September 2010, in a possible sign that the collapse in drilling could be coming to an end.
Shale oil drillers in the U.S. have begun moving rigs to more productive areas of the Permian and Eagle Ford basins in an attempt to increase productivity, analysts at Goldman Sachs said.
The dollar index, which measures the US dollar’s strength against a basket of currencies, held steady at around 95.28 on Monday, close to Friday’s settlement, mirroring the similarly calm oil markets.
Morgan Stanley analysts said it viewed the greenback’s pullback as a “tactical correction.” The index hit a more than 10 year high in March but has eased 5 percent since.
“A pullback of the (dollar index) to 93 could continue to push oil higher near term, but a resumption of the stronger USD trend would be a headwind for longer term price recovery,” the bank’s analysts said in a note on Monday.
A stronger dollar makes dollar denominated commodities, including oil, more expensive.
(Reporting By Jane Xie; Editing by Richard Pullin and Michael Perry)
This article was from Reuters and was legally licensed through the NewsCred publisher network.