WTI futures hover near 6-week high on China imports, upbeat US data

West Texas Intermediate Crude traded near Fridays six week-high and Brent held firmly above the $111 mark after data from Chinas customs administration showed the Asian nations crude imports rebounded in November, while overall exports jumped by the most since April and widened Chinas trade surplus to the highest since January 2009. A separate report showing Chinese inflation eased indicated the government will have enough room to push reforms next year, while sustaining growth. Strong employment and growth data from the U.S. last week continued to underpin the market, but gains were limited on renewed speculations the strong readings might prompt the Federal Reserve to trim its monthly bond purchases at FOMCs December 17-18 meeting.

On the New York Mercantile Exchange, WTI crude for delivery in January rose by 0.11% to $97.76 per barrel by 7:47 GMT, up 0.11% on the day. Prices shifted in a days range between $97.89, near Fridays six-week high of $98.05, and $97.63. The US benchmark rose by 0.3% on Friday and settled the week 5.4% higher, the best weekly performance in five months.

Meanwhile on the ICE, Brent futures for settlement in January traded at $111.57 a barrel at 7:54 GMT, down 0.04% on the day. Prices shifted in a narrow range between $111.77 and $111.54 a barrel. The European benchmark added 0.6% on Friday and settled last week 1.4% higher.

Oil prices drew support after better-than-expected trade data from the worlds second largest consumer aided demand prospects. Chinas General Administration of Customs said on Sunday in Beijing that outbound shipments surged by an annualized 12.7% last month, the biggest gain since April, fueled by strong demand from abroad. Analysts expected a moderate increase to 7.1%, up from October’s 5.6% gain.

The figures reflected increased exports to the U.S., Europe and South Korea, indicating robust global economic recovery and activity picking up. Shipments to the United States surged by 17.7% in November from a year earlier, the biggest increase since mid-2012, while exports to the European Union rose by 18.4%, the most in more than two years.

Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong, said in a note, cited by Bloomberg: “There are signs that the global activity and trade cycle is gaining momentum, driven by the recovery in high-income countries. China’s exporters are benefiting from that.”

Crude imports rose by 19.1% in November to average 5.73 million barrels per day, rebounding from Octobers 14-month low.

Sijin Cheng, an analyst at Barclays said in a note, cited by CNBC: “Chinese apparent demand could pick up moderately, as … Quanzhou and Sichuan refineries come online before year-end and runs increase at refineries that were in turnaround in October and November.”

The report also showed that overall imports rose at a slower pace than expected last month, but still posted a solid expansion, another sign that global trade activity is picking up. Inbound shipments jumped by 5.3% on an annual basis in November, trailing expectations for a 7.2% increase after posting at 7.6% in October.

This drove the Asian nation’s trade surplus to $33.30 billion dollars, the highest since January 2009. The gap was expected to narrow to $21.70 billion, according to analysts’ projections, down from $31.10 billion in October.

Meanwhile, Chinas National Bureau of Statistics reported early today that consumer inflation eased in November, providing the government with more space to push on with reforms and ease money supply, if needed. Consumer prices jumped by an annualized 3.0% last month, down from 3.2% in October and trailing projections to remain flat. Month-on-month, inflation decelerated by 0.1% after it advanced by 0.1% in October, defying expectations to remain unchanged.

Producer inflation fell by 1.4% and matched projections, marking a 21st consecutive decline, the longest falling streak since a 31-month stretch running from 1997 to 1999. Market players expect the release of Chinas industrial production figures, due tomorrow.

Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong, said for Bloomberg: “Inflation won’t be a main concern, at least in the near term. This will allow Beijing to focus on pushing reforms while keeping growth stable into 2014.”

U.S. data

The oil market continued to draw support after much-better-than-expected economic data from the US boosted demand prospects in the world’s No1 consumer. Data by the U.S. Commodity Futures Trading Commission showed that money managers increased their net-long positions by 7.8% in the week ended December 3, the biggest increase since July 23.

The Labor Department reported that unemployment in the U.S. fell to 7.0% in November, the lowest in five years, beating projections for a minor decline to 7.2% from October’s 7.3%. This was coupled with a report by the Energy Information Administration which showed US curde inventories fell in the seven days through November 29 for the first time in eleven weeks as refinery utilization picked up, suggesting further withdrawals should be expected.

U.S. employers added more jobs last month than projected. Non-farm payrolls jumped to 203 000, confounding expectations for a retreat to 183 000 from October’s downward revised 200 000. The progress in the labor market will probably provide a spark for the US economy, analysts expected.

The recovering labor market led to improving sentiment and higher spending, despite a 0.1% decline in household income. Household spending, which accounts for 70% of the economy, rose by 0.3% in October, beating both projections and last month’s increase of 0.2%.

Core personal consumption expenditures (PCE) met analysts projections on both monthly and annual basis, jumping by 0.1% and 1.1% in October, respectively.

Backing Price’s statement, a flash reading showed consumer confidence in the U.S. increased more than expected in December, hitting the highest level in five months. The preliminary Thomson Reuters/University of Michigan Consumer Sentiment index posted at 82.5 this month, up from 75.1 in October and sharply exceeding projections for a minor improvement to 76.0. The strong confidence was largely based on gains in employment, stock market and property values, offsetting October’s 16-day federal government shutdown.

This comes after the US Commerce Department reported on Thursday the nation’s preliminary Gross Domestic Product grew at a 3.6% annualized rate in the third quarter, up from the initial estimate of 2.8% and the strongest since Q1 of 2012, beating analysts’ projections for a 3.1% expansion. According to the report, US growth was mainly driven by the largest increase in inventories since early 1998. Inventories increased at a $116.5 billion annualized pace in Q3, compared to $86 billion rate the preceding quarter.

A separate report provided by the Labor Department showed that the number of people who filed for initial unemployment benefits sharply dropped in the week ended November 30. Initial Jobless Claims declined to 298 000 last week, compared to an upward revised 321 000 claims in the preceding week, confounding analysts’ expectations for a jump to 325 000.

Oil’s gains however remained limited as the upbeat data aroused speculations among some analysts that the Federal Reserve might surprisingly decide to pare its quantitative easing program at FOMC’s December 17-18 meeting. The committee’s October meeting minutes pointed that Federal Reserve officials may reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves.

However, broad expectations called for sustained stimulus until next year. A survey conducted by Bloomberg last month revealed that the Fed will probably trim its asset purchases to $70 billion from $85 billion at its March 18-19th meeting.