Crude oil futures were on the rise today after the world’s second largest energy consumer, China, released upbeat manufacturing data, while the US dollar continued declining under pressure from anticipation of more quantitative easing by the Federal Reserve.
The China Federation of Logistics and Purchasing said that its PMI (Purchasing Managers Index) climbed from 53.8 in September to 54.7 in October.
At the same time, the US dollar cotninued falling, making the dollar denominated crude cheaper for holders of other currencies, lifting demand further.
The Fed is widely expected to announce a new round of asset purchases following this week’s policy meeting, which will conclude on 3 November.
While it is almost certain that the Fed will go for more stimulus to achieve its goals of driving up inflation and cutting the unemployment rate, it is unclear what the scale of the second round of quantitative easing is going to be.
Goldman Sachs (NYSE:GS) has said that the Fed would announce a US$500 billion stimulus package this week and would have to spend a total US$2 trillion.
However, other reports suggested that the stimulus would amount to a few hundred billion dollars spread over a few months to minimise policy risks.
A larger stimulus would weaken the US dollar and boost economic activity, leading to a higher demand for raw materials such as metals and crude oil.
Meanwhile, Bloomberg reported that Saudi Arabia’s Saudi Aramco may raise the prices of all of its December supplies to Asia due to an increase in processing profits.
Citing unidentified regional refinery officials, the news agency said that Saudi Arabia’s largest export type Arab Light would go up 35 cents from November, while Arab Extra Light would climb 40 cents.
December Brent Crude rose to US$83.74/barrel on the ICE Exchange. Brent for January delivery last traded at US$83.92/barrel.
US light, sweet crude for December climbed to US$82.05/barrel, while January crude reached US$82.75/barrel on the New York Mercantile Exchange (NYMEX).
Shell (LON:RDSB) rose marginally, while fellow supermajor BP (LON:BP) lost nearly 1%, as did BG Group (LON:BG).
Cairn Energy (LON:CNE) was flat and Tullow Oil (LON:TLW) declined 1.6%.
Amec (LON:AMEC) dropped 1%, while another oil and gas engineering firm Petrofac (LON:PFC) added 1%.
Midcaps were mixed. JKX Oil & Gas (LON:JKX) and Dragon Oil (LON:DGO) added just over 1%. Heritage Oil (LON:HOIL) and Soco International (LON:SIA) posted small gains.
Melrose Resources (LON:MRS) tumbled 13%. Canadian company Sterling Resources ended its farm-in agreement with Melrose over four blocks in Romania.
Premier Oil (LON:PMO) and Salamander Energy (LON:SMDR) declined marginally.
Services companies were headed in different directions as Wood Group posted a small loss, while Wellstream Holdings (LON:WSM) rose marginally.
Energy sector focused investor Xtract Energy (LON:XTR) was among the top risers in the sector with a 10% rally. North Sea explorers Xcite Energy (LON:XEL) followed, rising 8.5%.
Oil and gas explorer and producer focused on the Kurdistan region of northern Iraq Gulf Keystone Petroleum (LON:GKP) and US focused Nighthawk Energy (LON:HAWK) added 7% ad 6% respectively.