Natural-gas futures up after small-than-expected supply rise
By Myra P. Saefong and Carla Mozee, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures climbed back above $104 a barrel on Thursday as better-than-expected manufacturing data from major oil consumer China brightened the outlook for energy demand.
Natural-gas futures, meanwhile, were poised for their highest close in almost a month following an increase in weekly U.S. supplies that was less than expected.
October crude oil CLV3 +0.44% added 47 cents, or 0.5%, at $104.32 a barrel on the New York Mercantile Exchange.
The contract traded at $103.69 a barrel in electronic trading just before HSBC said its preliminary August reading of manufacturing activity in China swung out of contraction. The China manufacturing PMI rebounded to a four-month high of 50.1, above the consensus expectation for a 48 reading, as reported by Dow Jones Newswires.
In July, the HSBC China manufacturing PMI had hit an 11-month low of 47.7.
The August report may soften concerns about slowing growth in China, the world’s second-largest oil consumer, according to data from the U.S. Energy Information Administration. China is on track to surpass the U.S. as the world’s top oil importer over the next four years, according to a report from consultancy Wood Mackenzie.
After crude was weighed down Wednesday by the anticipation of the U.S. Federal Reserve minutes from the July meeting, and then by the central bank’s ‘hat-tip to impending tapering,’ the oil market’s focus has shifted to the latest data flow,” said Matt Smith, a commodity analyst at Schneider Electric, in a daily note.
“China’s number showed a surprise return to expansion, while the Eurozone print was both above consensus and in expansionary territory,” said Smith.
According to a Platts report issued Thursday, China’s apparent oil demand climbed by 6.6% to average 9.82 million barrels per day in July compared with a year earlier.
The euro-zone recovery also continued to gain momentum in August, with the region seeing its largest monthly increase in business activity for over two years. Data from Markit showed on Thursday that the preliminary composite purchasing managers’ index climbed to a 26-month high of 51.7 in August, up from 50.5 in July.
In the U.S., the flash manufacturing purchasing managers index suggested a moderate expansion of the manufacturing sector, rising to 53.9 in August, the highest level in five months.
And the number of people in the U.S. who applied last week for unemployment benefits rose to the highest level in a month but remained near a postrecession low
In the currencies market, the U.S. dollar DXY +0.06% advanced against most key rivals after the China figures, a headwind for oil and other commodities as a stronger dollar tends to dull purchases of dollar-denominated resources by holders of other currencies.
October Brent crude UK:LCOV3 -0.06% traded down by 4 cents at $109.77 a barrel. Brent on Wednesday fell 34 cents, or 0.3%, on ICE Futures.
Back on Nymex, September gasoline RBU3 +0.37% was up 2 cents, or 0.6%, at $2.96 a gallon while September heating oil was up a half cent at $3.08 a gallon.
Fed talk and supply data
Nymex crude futures for October lost 1.2% on Wednesday to finish below $104 a barrel, with “bulls tag-teamed by a bearishly construed Department of Energy report and confusion regarding the Fed’s taper-talk,” said Stephen Schork, editor of the Schork Group, in a note late Wednesday.
Minutes from the Federal Reserve’s meeting in July showed policy makers plan to start tapering stimulus measures later this year, with lower liquidity a potential obstacle for the energy market.
But traders on Wednesday also assessed an EIA report that showed that weekly U.S. crude supplies fell a bit more than expected.
Crude stockpiles declined by 1.4 million barrels for the week ended Aug. 16, compared with the Platts consensus estimate of a 1 million-barrel decrease. Gasoline supplies also dropped by a more-than-expected 4 million barrels.
The EIA on Thursday reported a smaller-than-expected increase in natural-gas supplies of 57 billion cubic feet for the week ended Aug. 16. Analysts polled by Platts forecast a climb of between 67 billion cubic feet and 71 billion cubic feet.
The data were bullish relative to expectations, but the “match with the give-year average says ‘neutral,’” said Tim Evans, energy analyst at Citi Futures.
September natural gas NGU13 +2.69% rose 8 cents, or 2.4%, to $3.54 per million British thermal units. It was trading around $3.50 before the data. Prices haven’t closed above $3.50 since July 26, according to FactSet data.
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong.
Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
