Oil rises towards $104 on China data

Tue Jul 24, 2012 9:54am EDT
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By Peg Mackey

LONDON (Reuters) - Oil climbed towards $104 a barrel on Tuesday as China's economy showed signs of improvement, though gains were checked by further evidence of damage to Europe's economy.

China's manufacturing output in July grew at its fastest pace in nine months, helping lift an index of activity in the country's factory sector to its highest level since February and suggesting pro-growth government policies are having an impact.

"(Oil prices) are finding support from the preliminary Purchasing Managers' Index for the manufacturing sector in China ... pointing to growing economic activity in the second-largest oil consumer country," said a Commerzbank research note.

"The preliminary purchasing managers' indices from the eurozone, on the other hand, remain persistently at recession level and are thus likely to counter any stronger price recovery."

Brent crude gained 47 cents to trade at $103.73 a barrel by 8:50 a.m. EDT (1350 GMT), after reaching $104.26 in earlier trade.

U.S. crude rose 46 cents to trade at $88.61.

Brent fell more than 3 percent on Monday after Spain's central bank said the euro zone's fourth-largest economy sank deeper into recession in the second quarter, stoking fears the country was headed for a bailout.

"We started off buoyant after the Chinese data, then the European data wasn't so good, which hit oil," said Rob Montefusco, a trader at Sucden Financial.   Continued...

An employee holds a gas pump at a gas station of Hyundai Oilbank in Seoul June 15, 2012. REUTERS/Choi Dae-woong