Oil pares losses as European manufacturing improves

West Texas Intermediate erased partially earlier losses and Brent oil rebounded and traded on positive territory as upbeat manufacturing data from Europe boosted demand prospects. Expanding manufacturing activity in China also supported the market, balancing against easing concern over an imminent U.S.-led attack against Syria.

On the New York Mercantile Exchange, WTI crude for October delivery trimmed daily losses and traded at $107.11 per barrel at 11:39 GMT, down 0.50% on the day. Prices rebounded after hitting a days low of $105.06 earlier in the session, while days high stood at $107.29 per barrel. The American benchmark rose by 1.2% last week and 2.5% in August, marking a third straight monthly advance.

Meanwhile on the ICE, Brent crude for delivery in October rebounded to positive territory and traded at $114.43 per barrel at 11:40 GMT, shortly after touching days high at $114.58. Days low remained at $112.28 a barrel. The European benchmark fell for a third straight day but settled last week 2.7% higher, the best weekly performance since early July, after adding 2.6% in the preceding two five-day periods.

Oil prices regained positions on Monday as upbeat manufacturing data from Europe signaled slow but consistent recovery of the Euro zones economic activity. Both Sweden and Norway’s manufacturing PMI rose more than projected to 52.2 and 53.0 respectively. Spain’s manufacturing sector marked an expansion for the first time in two years and surged to 51.1 in August from 49.8 in July, outperforming analysts’s projections for a reading of 50.1. France’s manufacturing sector marked an expected contraction as the country’s PMI remained flat at 49.7, meeting projections. Germany and Switzerland’s indicators remained in the expansion zone but posted a retreat from the preceding month, falling to 51.8 and 54.6 in August from 52.0 and 57.4 in July respectively.

However, Great Britain’s Manufacturing CIPS rallied to 57.2, the highest since 2 1/2 years, surpassing expectations for a surge to 55.0. This was the biggest advance in nineteen years. July’s reading was revised upward to 54.8 from an initial reading of 54.6.

The general Euro zone’s Final Manufacturing PMI surpassed analysts’ expectations for remaining unchanged at 51.3 and rose to 51.4, indicating the the single currency bloc’s economic activity is consistently improving.

On Sunday, the Chinese National Bureau of Statistics reported that the country’s manufacturing Purchasing Managers’ Index surpassed forecasts for a jump to 50.6 according to a Reuters poll and rose to 51.0 in August, the highest since last April, from 50.3 in July.

Earlier on Monday, according to a separate private survey by HSBC and Markit Economics, the HSBC Purchasing Managers’ Index surged to 50.1 in August, marking a major improvement from July’s 11-month low of 47.7 in July and ending a three-month declining cycle. Chinese manufacturers signaled a slight expansion in growth that was based on improving market conditions.

The oil market was also underpinned by a further reduction in Libya’s oil output. Sliman Qajam, a member of the parliamentary energy committee, said in a phone interview for Bloomberg that the African country’s production rate fell by 50 000 barrels per day on Sunday to 150 000 bpd, down from a 1.6 million bpd level prior to the civil war in 2011. Libya’s government may stop paying civil servants by the end of the year as the country needs a minimum output of 400 000 barrels per day to be able to afford public-sector salaries, Qajam said.

Oil prices were however pressured as concern over an imminent U.S. military attack against the Syrian regime led by Bashar al-Assad eased as President Obama announced he will seek approval by the U.S. Congress to initiate a punitive attack against Syria. This would delay any military action at least for nine days as the summer recess ends on September 9.

Market players will be keeping a close watch on this week’s key U.S. data to gauge the American economy’s strength and oil demand outlook. On Tuesday, the ISM Manufacturing index is expected to have fallen in August, while the Markit U.S. Manufacturing PMI should have remained flat. On Wednesday, the U.S. trade deficit is projected to have widened to $38.6 billion in July from $32.224 billion in June. Thursday’s ADP Employment Change will provide preliminary information for the U.S. labor market. Also on Thursday, Q2 Non-Farm Productivity and Unit Labor Costs should have increased, while the ISM Non-Manufacturing Composite and Factory Orders are expected to have declined. On Friday, the U.S. Non-Farm Payrolls should have surged in August, while the Unemployment Rate likely remained unchanged at 7.4%. Average Hourly Earnings and Average Weekly Hours are anticipated to have increased as well.