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Activity at China's factories shrank at its
fastest pace for a year as new orders fell in April, a private
business survey showed on Monday, hardening the case for policy
stimulus to boost the world's second biggest economy.
Brent crude <LCOc1> was up 39 cents to $66.85 a barrel by 1046
GMT (6.46 a.m. EDT), after hitting a 2015 peak of $67.00. U.S.
crude <CLc1> gained 22 cents to $59.37. The U.S. benchmark hit
its highest this year at $59.90 on May 1.
"The Chinese data is weaker but it seems the oil market has had
a limited reaction. What the market really wants to see is
supply being cut to match the demand level," said Ric Spooner,
chief market analyst at Sydney's CMC Markets.
Brent has rallied by more than 40 percent from a near six-year
low of $45.19 in January, supported by expectations of a tighter
future supply and demand balance, as well as a weaker dollar and
tension in the Middle East.
"The market is expecting the tightening in the second half of
the year," said Eugen Weinberg, analyst at Commerzbank.
"We argue this dynamic is hardly fundamentally sound," he said
of the market's recent rally.
A public holiday in Britain on Monday is likely to limit trading
volume.
Oil's collapse in 2014 was due to ample supply and the refusal
by the Organization of the Petroleum Exporting Countries to cut
output. OPEC shifted strategy in a bid to slow competing supply
sources, such as U.S. output, to defend its market share.
The drop in U.S. drilling has raised expectations of lower
output and on Friday, oil services firm Baker Hughes Inc. said
the number of active rigs has fallen for a record 21 straight
weeks to the fewest since September 2010.
Weighing on prices were the latest signs that supply is
currently very ample, including higher Libyan exports, record
Iraqi exports in April and OPEC oil output at its highest in
2-1/2 years.
A stronger dollar also provided a headwind, making
dollar-denominated commodities more expensive for holders of
other currencies, which tends to weigh on oil prices.
(Reporting by Alex Lawler and Jane Xie; Editing by Ruth
Pitchford)
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