Oil prices settled higher on Monday, benefiting from stronger-than-expected Chinese manufacturing activity data, which suggests a recovery in the world’s second-largest economy and major crude importer.
At 2:30 PM ET (6:30 PM GMT), Brent crude futures rose 2 percent to $86.41 per barrel, while U.S. West Texas Intermediate (WTI) crude futures climbed 2.3 percent to $83.387 per barrel.
Chinese manufacturing data beats expectations
The positive tone was extended on Monday after the Caixin Manufacturing Purchasing Managers’ Index (PMI) rose to 51.8 in June, beating expectations of 51.5 and the prior month’s reading of 51.7. This overshadowed the government’s PMI data, which showed China’s manufacturing sector contracted for a second consecutive month in June.
Softer U.S. dollar boosts oil demand
Helping the oil price rally was a fall in the U.S. dollar index, which extended declines from Friday after the Personal Consumption Expenditures (PCE) price index, the Federal Reserve‘s preferred inflation gauge, showed inflation eased mildly in May. This spurred some optimism that U.S. inflation was cooling and saw traders ramp up bets on a 25 basis point rate cut in September, weighing on the greenback.
A softer dollar benefits oil demand by making the commodity cheaper for international buyers.
Upcoming U.S. inventory data
Traders are now looking ahead to the weekly U.S. petroleum report due on Wednesday, hoping to see signs that summer demand is making a dent in crude inventories amid a pickup in refinery activity.
Read more: Oil prices surge amid weaker dollar, rate cut bets
Hurricane season in the Americas
Additionally, traders are watching for the impact of hurricanes on oil and gas production and consumption in the Americas, as the Atlantic hurricane season started with Hurricane Beryl on Sunday, with a warning in effect in several Caribbean islands.
The strong start to the week for oil prices comes after the Energy Information Administration reported that oil production and demand for major products rose to a four-month high in April, though a severe hurricane in the important Gulf of Mexico producing region could impact this.
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