Crude futures ended at a one-month high Monday as the latest evidence of strong economic growth in China boosted the outlook for future oil demand.
The continued shutdown of a major pipeline bringing Canadian crude to U.S. refiners also supported prices, though robust stockpiles reduced the likelihood of a supply crunch.
Light, sweet crude for October delivery settled up 74 cents, or 1%, at $77.19 a barrel on the New York Mercantile Exchange, the highest settlement since Aug. 11. Brent crude on the ICE futures exchange was recently up 91 cents, or 1.2%, at $79.07 a barrel.
China reported Saturday that its August industrial production grew by 13.9% from a year earlier, surpassing expectations for the economy that is expected to provide a major portion of new demand for commodities in the coming months.
Oil futures began rising as soon as the Asian trading day began Monday, as did the price of copper, a market even more dependent on China for demand. Most-active December copper futures settled 2.1% higher at $3.4790 a pound.
Markets worldwide also rose after global banking regulators announced new rules at the conclusion of talks in Basel, Switzerland, giving banks a longer window than expected to comply with stricter lending limits. While not directly impacting commodities, the conclusion of the conference ended fears that tough new rules would create turmoil in financial markets.
"Whenever you remove some uncertainty in the marketplace, that's generally bullish for stocks and gave a boost to oil as well," said Phil Flynn, an analyst with PFGBest in Chicago.
The shutdown of an Enbridge Energy Partners (EEP) pipeline carrying 670,000 barrels a day of oil to the U.S. also provided lingering support for oil prices, after boosting futures last week. The pipeline was shut down Thursday after a leak was discovered in Illinois. However, U.S. oil and fuel inventories are at their highest point since the early 1980s, and Enbridge has said that some crude can be rerouted along other pipelines.
Nevertheless, analysts in a Dow Jones survey predict that the U.S. Energy Information Administration will report a 2.6-million-barrel drop in oil inventories in the week ended Sept. 10. Gasoline stockpiles are expected to drop 1.1 million barrels, while distillate inventories, including heating oil and diesel, are seen rising 300,000 barrels. Refinery utilization is expected to drop 0.6 percentage point to 87.6% of capacity.
Inventories worldwide appear to be tighter than in the U.S., and oil prices should rise once the domestic supply situation begins to reflect the global one, wrote analysts with Goldman Sachs Group Inc. The analysts reiterated a call for prices to trade between $85 and $95 a barrel later this year.
"The tide will soon be turning in the U.S. oil market," the analysts wrote. "However, we expect that a sustained draw on U.S. inventories will be a required catalyst for...oil prices to move higher on a sustainable basis."
Front-month October reformulated gasoline blendstock, or RBOB, settled 0.75 cent, or 0.4%, higher at $1.9806 a gallon. October heating oil settled 1.83 cents, or 0.9%, higher at $2.1227 a gallon.
