WTI climbs above $56 ahead of API data boosted by risk-on flows
- Upbeat data from China allows market sentiment to recover.
- China's cabinet reaffirms commitment to support economy.
- Coming up: API's weekly crude oil stock report.
Crude oil prices gained traction during the early trading hours of the Asian session on Wednesday as the upbeat data from China eased fears over a slowdown in the world second-biggest economy, which is also the second-biggest oil consumer.
Chinese economy showing signs of life
After closing the last three trading days in the negative territory and losing nearly 5% in during that period, the barrel of West Texas Intermediate staged a decisive recovery today and was last seen trading at $56.16, adding 4.15% on a daily basis. Earlier today, the monthly Caixin China PMI report showed that the business activity in the service sector at a more robust pace than expected with the Services PMI rising to 52.1 in August from 51.6.
Commenting on the data, “China’s economy showed clear signs of a recovery in August, especially in the employment sector," said Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group. "There’s no need to be too pessimistic about China’s economy, with the launch of a series of policies to promote high-quality growth.”
On the same note, the Chinese cabinet today said that they will maintain a prudent monetary policy and will finetune the policy in a preemptive way with an aim to support the economy and keep consumer prices stable.
With the addition of easing fears of a no-deal Brexit and its potential negative impact on the global economy, risk-on flows continued to dominate the market action and allowed risk-sensitive crude oil prices to stretch higher. Later in the day, the American Petroleum Institue will release its weekly crude oil stock report.
Technical levels to watch for