By Adedapo Adesanya
Chinese factory data, rising energy demand and hopes for an agreement in the United States on more coronavirus-related economic stimulus saw crude futures pointing north on Monday, August 10.
The international benchmark, Brent crude, rose 61 cents or 1.33 per cent to $45.01 per barrel. On the other hand, the United States West Texas Intermediate (WTI) crude gained 83 cents or 2.01 per cent to trade at $42.05 per barrel.
The gain on Monday was driven by a couple of factors, China’s factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed toward pre-pandemic levels.
According to reports, the producer price index (PPI) in the country fell 2.4 per cent from a year earlier in July compared a 3.0 per cent drop in June.
The rise in PPI inflation was driven by higher prices of oil and other major raw materials as the global economy, including the Chinese economy, recovered from the worst phase of the pandemic.
And the possibility that it could rise further in coming months on a global recovery, spelt an advantage for the market.
Prices also found support after talks between Democrats and members of President Donald Trump’s administration in the United States which broke down last week resumed.
President Trump said on Monday that House Speaker Nancy Pelosi and Senator Chuck Schumer, top Democrat in that chamber of Congress, wanted to meet with him to make a deal on coronavirus-related economic relief.
This deal is important to oil prices because the relief will help increase the purchasing power of the world’s largest consumer and this will boost economic activity to spur demand. Investors are also keeping a close eye on negotiations.
The market also continued to find support following Iraq’s announcement that it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months.
The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+.
If it fully complies, the cut will take Iraq’s total reduction to 1.25 million barrels per day in both this month and the next.
Modupe Gbadeyanka