Investing.com– Oil prices rose Monday, benefiting from stronger-than-expected Chinese manufacturing activity data, suggesting a recovery in the world’s second-largest economy and major crude importer.
At 08:40 ET (12:40 GMT), Brent crude futures rose 0.8% to $85.64 a barrel, and U.S. West Texas Intermediate crude futures climbed 0.7% to $82.08 a barrel.
Both contracts were sitting on bumper gains through June as geopolitical ructions in the Middle East and Russia pushed up concerns over potential disruptions in supply, which saw traders attach a greater risk premium to crude.
Oil benefits from Chinese manufacturing strength
This positive tone was extended Monday after Chinese manufacturing activity grew more than expected in June, private purchasing managers index data showed on Monday.
The Caixin Manufacturing PMI rose 51.8 in June, compared to expectations for a reading of 51.5, and the prior month’s reading of 51.7.
The reading has overshadowed government PMI data released on Sunday, which showed China’s manufacturing sector shrank for a second consecutive month in June. A reading below 50 indicates contraction.
Also helping the tone was a fall in the dollar index, extending declines from Friday after PCE price index– which is the Fed’s preferred inflation gauge- showed inflation eased mildly in May.
The reading spurred some optimism that U.S. inflation was cooling, and saw traders ramp up bets on a 25 basis point rate cut in September, which weighed on the greenback.
A softer dollar benefits oil demand by making the commodity cheaper for international buyers.
Fed cues could move the dollar
The focus this week is on signals from the Fed, with Chair Jerome Powell set to speak on Tuesday, while the minutes of the Fed’s June meeting are due on Wednesday.
Key nonfarm payrolls data is also due on Friday, with the strength of the labor market a key consideration for the Fed in moving interest rates.
But even with positive signals on interest rates, inventory data released last week showed that U.S. fuel demand remained weak despite increased travel during the summer season.
Hurricane season in Americas
Traders are also watching for the impact hurricanes have on oil and gas production and consumption in the Americas.
The Atlantic hurricane season started with Hurricane Beryl on Sunday, with a warning is in effect in Barbados, St Lucia, St Vincent and the Grenadines and Tobago.
On Friday the Energy Information Administration reported that oil production and demand for major products rose to a four-month high in April, but a severe hurricane in the important Gulf of Mexico producing region could impact this.
(Ambar Warrick contributed to this article.)
