Strong economic data from China boosts oil prices!

China's Manufacturing PMI - March

With China's manufacturing sector returning to the expansion territory in March, recording the highest manufacturing PMI since September, 2023, the economic outlook of the world's second largest economy depicts a positive picture - at last.

The announcement on Sunday by China's National Statistics Bureau on the PMI, was further boosted by the fact that the country's logistic industry showed even better improvement in March; the data released on Tuesday shows that the logistics industry prosperity index rose by 4.4 points to 51.5.

That means, Chinese economy shows the signs of recovery while moving past the weathered milestone of stagnation that silently witnessed the interplay of a range of complex factors, some clearly stemming from evolving geopolitical axis, in a relatively short passage of time.

The positive indicators in the recent days from China appear to be showing its catalytic effect on the crude oil markets; the price of both WTI and Brent rose after the Easter break.

As of Wednesday at 11:00 GMT, the price of WTI and Brent were at $85.47 and $89.30 respectively.

WTI and Brent prices | www.oilfutures.co.uk

The price rally, however, is facing some headwinds. The combination of  record low prices of LNG, liquified natural gas, the end of winter season in the northern hemisphere and of course, large gas reserves in Europe and America has clearly become a drag on the recovery of oil prices.

After becoming the top exporter of LNG last year, the US has clearly elbowed the traditional players in the sector such as Qatar, Russia and Australia to claim the crown: by tapping on vast reserves of shale gas trapped in the rock formations by horizontal drilling, coupled with the advent of new technologies, the new-found dominance of the US in LNG sector will remain unchallenged for years to come.

With prices of LNG at record low levels and the stocks being in abundance, the consumers can now turn to alternatives, if the price of oil tends to go up steeply. In this context, analysts do not believe that the price of crude oil will skyrocket in the near future, defying the over-the-top forecasts of certain investment bankers who try to shore up both the prices and the current mood in the markets.

Although the US is in pole position at present, thanks to being the top fossil fuel producer, the road ahead is not short of potholes: the climate lobby is active as never before and their relevance has never been that significant, just seven months to go before the presidential election, especially, when the two main contenders hold diametrically opposing views on the subject. 

In addition, markets uncertainties and regulatory pressure can make things even more unpredictable in the coming months, despite the rare positive sentiment. 

Meanwhile, as far as the production of oil by the members of the OPEC+ is concerned, the recent JMMC - Joint Ministerial Monitoring Committee -  of the organization ended recently without much fanfare; the production will remain at the current level for the foreseeable future with the contribution from Venezuela remains as volatile as ever.

In short, the price of oil will hover over current level without going through the roof in such a way that both producers and consumers can find common ground that guarantees the economic survival of both.