It was reported over the weekend that China’s industrial production surged 13.9% year on year in August, inspiring optimism that the economic expansion of the world's second largest energy consumer will continue.
China's bullish production figures more than offset the negative impact from another update, which showed an increase in the inflation rate to an annualised 3.5% in August from 3.3% in July, reaching the highest level in nearly two years. The inflation was largely driven by a 7.5% rise in food prices due to the widespread floods that hit the country last month.
That data, however, had little influence on stock and commodity markets as the price increases in China are seen as temporary and aren’t likely to prompt the government to introduce further monetary policy tightening measures to curb inflation.
Speculation that US retail sales rose further in August after climbing 0.4% in the previous month added to the sentiment, sending equities in Asia and Europe as well as stock index futures in the US up.
The UK’s FTSE 100 rallied 1.1%, while the Dow Jones Industrial Average is currently projected to open with a 0.8% gain.
Oil prices usually track movements in stock markets, which serve as an indicator of the strength of the economy, impacting the outlook for energy demand.
October Brent Crude improved to US$78.45/barrel, while US light, sweet crude for October delivery advanced to US$77.23/barrel.
Blue chip oil and gas producers were on the rise today. Supermajors BP (LON:BP) and Shell (LON:RDSB) advanced 1.3% and 1.45%, while BG Group (LON:BG) added 1.1% and Tullow Oil (LON:TLW) climbed 1%.
Cairn Energy (LON:CNE) posted a small gain.
Engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) stood just above the opening level.
Premier Oil (LON:PMO) led the midcaps with a 2.4% advance. Soco International (LON:SIA) and Dragon Oil (LON:DGO) followed, climbing 1.3% and 1% respectively. Heritage Oil (LON:HOIL) and JKX Oil & Gas (LON:JKX) tacked on less than 1%, while Dana Petroleum (LON:DNX) was flat.
Salamander Energy (LON:SMDR) and Melrose Resources (LON:MRS) went against the tide, shedding 1.9% and 1.1% respectively.
Oil and gas engineering firm Wood Group (LON:WG) did well, tacking on 2%.
US focused explorer and producer Caza Oil & Gas (LON:CAZA) was among the leading performers in the sector with a 7.5% gain.
East and Central Africa focused oil and gas explorer Dominion Petroleum (LON:DPL) and Iraq focused exploration company Petrel Resources (LON:PET) climbed 4%.