Crude-oil futures extended overnight gains in Asian trading as expectations of monetary easing in the U.S. outweighed concern about weak Chinese manufacturing data.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at $98.12 a barrel at 0622 GMT, up $0.86 in the Globex electronic session. October Brent crude on London's ICE Futures exchange rose $0.91 to $115.82 a barrel.
Global oil markets have proved surprisingly tight since the end of the second quarter, causing the Nymex and Brent crude benchmarks to gain more than 25%. Demand has been supported by seasonal factors and some unexpectedly positive macroeconomic data, while supply has tightened due to disruptions in the North Sea and lower Iranian exports.
Thursday's gains followed modest increases overnight on growing expectations that the U.S. Federal Reserve will implement additional monetary stimulus, boosting demand for crude oil. Minutes from the last Federal Open Market Committee meeting released Wednesday indicated that the Fed could take action "fairly soon."
Market participants largely shrugged off disappointing Chinese manufacturing data released Thursday. The preliminary HSBC China Manufacturing Purchasing Managers Index fell to a nine-month low of 47.8, compared with a final reading of 49.3 in July. A reading below 50 indicates contraction from the previous month, while one above 50 indicates growth.
If the final reading is below 50, August would be the 10th straight month of contraction, reflecting extended difficulty for Chinese manufacturers.
Meanwhile, Tropical Storm Isaac has strengthened over the Caribbean and is expected to become a hurricane with the potential to disrupt oil production in the Gulf of Mexico.
"We think WTI [West Texas Intermediate] is likely to break $98 a barrel in the near term, and if Isaac's track firms up toward the U.S. Gulf coast, $100 a barrel is not out of the question," the ANZ analysts said in a note.
A sharp decline in U.S. crude-oil inventories reported Wednesday also gave market participants a reason to take a more bullish stance.
U.S. crude stockpiles dropped by 5.4 million barrels in the week ended Friday, data from the Energy Information Administration showed. Inventories had been expected to rise moderately.
"We expect a record demand level this quarter, driving a global draw in oil inventories," Barclays analyst Paul Horsnell said in a note.
A release of U.S. strategic oil stocks is becoming more likely but it may not do much more than limit price increases unless it is unexpectedly large, Mr. Horsnell said.
Nymex reformulated gasoline blendstock for September--the benchmark gasoline contract--rose 328 points to $3.1370 a gallon, while September heating oil traded at $3.1497, 210 points higher.
ICE gasoil for September changed hands at $992.75 a metric ton, up $7.75 from Wednesday's settlement.
Write to Jacob Gronholt-Pedersen at jacob.pedersen@dowjones.com
