Oil climbs on positive China data, rising demand
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[August 10, 2020] By
Bozorgmehr Sharafedin
LONDON (Reuters) - Oil rose on Monday,
supported by an improvement in Chinese factory data and rising energy
demand as countries eased lockdowns, but traders remained cautious due
to U.S.-China tensions and uncertainty over a U.S. stimulus package.
Brent crude <LCOc1> rose 41 cents, or 0.9%, to $44.81 a barrel by 1107
GMT, while West Texas Intermediate (WTI) U.S. crude <CLc1> was up 56
cents, or 1.4%, to $41.78 a barrel.
Saudi Arabian Aramco <2222.SE> CEO Amin Nasser said on Sunday that he
sees oil demand rebounding in Asia as economies gradually open up.
China's factory deflation eased in July, driven by a rise in global oil
prices and as industrial activity climbed back towards pre-coronavirus
levels, adding to signs of recovery in the world's second-largest
economy.
"With oil demand still slowly grinding higher, and oil supply in check
due to the OPEC+ production cut deal and prices too low to incentivise
strong production growth in the United States, the oil market remains
undersupplied," UBS analyst Giovanni Staunovo said.
Iraq said on Friday 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, a grouping known as
OPEC+.
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The sun is seen behind a crude oil pump jack in the Permian Basin in
Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus
Mordant/File Photo
"This would send out a strong signal to the oil market on various levels. That
said, this would also require the international companies operating in Iraq to
join in with the cuts," Commerzbank analyst Eugen Weinberg said.
However, uncertainty over U.S. fiscal stimulus put some pressure on prices.
President Donald Trump signed a series of executive orders to extend
unemployment benefits after talks with Congress broke down.
U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin said on
Sunday they were open to restarting the talks.
"The longer this drags on, the worse it is for the demand scenario," said
Michael McCarthy, market strategist at CMC Markets and Stockbroking.
Adding to the uncertainty were ongoing tensions between Washington and Beijing.
Trump signed two executive orders banning WeChat and TikTok in 45 days' time
while announcing sanctions on 11 Chinese and Hong Kong officials.
Markets will now keep an eye on a China-U.S. meeting on trade scheduled for this
weekend.
(Reporting by Bozorgmehr Sharafedin in London; additional reporting by Sonali
Paul in Melbourne; editing by Louise Heavens and Jason Neely)
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