Oil inches higher on uptick in market sentiment

Oil prices stayed in positive territory in Asian trade Thursday, triggered by stronger market sentiment across financial markets and stable Chinese manufacturing data.

The lack of a sharp downward price movement due to an unexpected increase in U.S. oil stockpiles also indicates strong support levels for oil prices, market observers said. But macroeconomic indicators could still have an outsized impact on oil prices and Friday’s U.S. jobs report will be closely watched for cues.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November CLX5, +1.57% traded at $45.76 a barrel, up $1.49 in the Globex electronic session. November Brent crude LCOX5, +0.97% on London’s ICE Futures exchange rose $0.42 to $48.79 a barrel.

Oil prices have taken a beating in the third quarter, with both Nymex and Brent crude losing around 24% during the quarter, and both benchmarks posting declines for four of the past five quarters.

Earlier Thursday, official data showed manufacturing activity in China continued to contract in September. China’s official manufacturing purchasing managers index ticked up to 49.8 in September from 49.7 in August, marginally above consensus estimates of 49.7.

“Looking ahead, we expect sentiment to begin to improve gradually over the coming months as the stock market stabilizes and recent policy support measures continue to feed through into stronger economic activity,” Capital Economics said in a note.

Some Asian equity markets were stronger on the brief uptick in sentiment and on signs of improvement in the U.S. economy. Prices across other commodities like copper and base metals also strengthened. China and Hong Kong markets are closed for national holidays.

However, emerging market recovery remains on shaky ground and oil markets are likely to remain sensitive to macroeconomic developments, especially from China and the U.S.

The two countries will continue to exert a higher-than-normal influence on oil markets and firming economic data may entice the Fed to raise rates before the end of the year, Michael Wittner, head of oil research at Societe Generale said. “As such, the U.S. jobs number on Friday will be carefully followed,” he said. A strong jobs report will be bullish for the dollar, and bearish for crude.

A key support for oil prices is coming from declining U.S. crude production, along with healthy global fuel demand led by China and the U.S., which helped offset the impact of an unexpected 4-million-barrel buildup in weekly U.S. oil stockpiles last week.

Nymex reformulated gasoline blendstock for November NGX15, +0.24% — the benchmark gasoline contract — rose 121 points to $1.3788 a gallon, while November diesel traded at $1.5483, 109 points higher.

ICE gasoil for October changed hands at $468.75 a metric ton, up $4.75 from Wednesday’s settlement.

Source: MarktWatch