By Adedapo Adesanya
Crude oil prices pointed north on Tuesday, April 6 as the market overlooked bearish sentiments to focus on strong economic data from China and the United States.
As a result of this, the value of the international oil benchmark, Brent crude futures, gained 54 cents or 0.87 per cent to trade at $62.69 per barrel, while the US benchmark, West Texas Intermediate (WTI) crude futures, went up by 1.16 per cent or 68 cents to sell at $59.33 per barrel.
Business Post reported that both futures fell by more than 4 per cent on Monday, pressured by increasing oil supply from the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) and rising COVID-19 infections in India and parts of Europe.
However, on Tuesday, the market latched onto good news as data for March showed that the US services activity hit a record high.
In the latest indication of an improving economy that is being boosted by increased vaccinations and massive fiscal stimulus, the United States Institute of Supply Management (ISM) data showed that the non-manufacturing activity index rebounded to a reading of 63.7 last month.
The improvement was also tied to warmer weather, making it the highest in the survey’s history and followed 55.3 in February.
A reading above 50 indicates growth in the services sector, which accounts for more than 60 per cent of US economic activity.
China’s service sector also gathered steam with the sharpest increase in sales in three months.
The Caixin/Markit Purchasing Managers Index (PMI) for services in the Asian giant rose to 54.3, the highest level since December, from 51.5 in February, well above the 50 mark that separates growth from contraction.
Chinese authorities successfully curbed internal transmission of the COVID-19 virus during the winter, causing quarantine restrictions and testing requirements to be relaxed, pushing forth a positive outcome.
However, despite this, the market faces indications that crude inventories may rise in the United States, another pointer that can weaken prices.
The American Petroleum Institute (API) on Tuesday reported a modest draw in crude oil inventories of 2.6 million barrels for the week ending April 2.
Analysts had predicted a smaller draw of 1.436 million barrels for the week.
In the previous week, the API reported a build in oil inventories of 3.910 million barrels after analysts had predicted a much smaller build of 107,000 barrels.
This data will be confirmed by the official government from the Energy Information Administration (EIA) which will be released on Wednesday.
Dipo Olowookere