Strong economic data from China pushes Brent further up

The front-month ICE Brent contract has gained $1.50/bbl on the day, to trade at $94.05/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Recent economic data from China has supported Brent futures.

The oil market turned positive about China’s economic health after the country's National Bureau of Statistics reported a better-than-expected retail sales growth and industrial output in August, reported Reuters.

Any sign of economic rebound in China would suggest strong demand growth in the world’s largest crude oil importing nation, thereby helping oil prices to move up.

“China's August figures revealed that retail sales and factory output exceeded forecasts, painting a positive economic picture,” said SPI Asset Management’s managing partner Stephen Innes.

Moreover, the collective 1.3 million b/d output reduction pledged by Saudi Arabia and Russia earlier this month also kept Brent futures above the $90/bbl mark.

“Currently, there are clear indications of short-term strength in the market,” said Innes. “This significant increase [in oil prices] is attributed to the intentional output reductions by major oil-producing countries such as Saudi Arabia and Russia,” he added.

Downward pressure:

Meanwhile, the broader OPEC+ output cuts are creating distortions within the oil market, especially with a deficit in medium sour crude grade, argued ING’s head of commodities strategy Warren Patterson.

“The recent price strength might give the Saudis the confidence to start unwinding these cuts – too aggressively and it could put renewed pressure back on the market,” he added.

After the recent surge in oil prices, oil traders are expected to trade cautiously as “[Brent] futures are approaching overbought territory,” said Innes.

By Aparupa Mazumder

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