Oil rises, stimulus hopes outweigh weak Chinese data

Mon Sep 3, 2012 2:23pm EDT
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By Christopher Johnson

LONDON (Reuters) - Oil rose on Monday, despite Chinese data showing a deepening slowdown in the world's biggest energy consumer, as investors focused on the possibility of more stimulus measures and other moves to try to revive economic growth.

China's factories have been hit by slowing orders, two major surveys showed on Monday, suggesting the slowdown in the world's No. 2 oil user could be worsening.

The figures prompted a new round of speculation that governments would act sooner rather than later to increase money market liquidity to encourage bank lending, a move that would almost certainly boost commodities and oil.

Trading volumes were limited, with U.S. financial markets closed for the Labor Day holiday.

Brent October futures traded up $1.21 to settle at $115.78 per barrel after jumping nearly $2 on Friday. U.S. crude oil futures, which were trading electronically for Tuesday settlement, gained 57 cents to trade at $97.04 a barrel. Electronic trade ended at 1:30 p.m. ET (1730 GMT), and will resume at 6 p.m. ET.

Both contracts rose more than 9 percent in August, driven by supply concerns and hopes for stimulus from the Federal Reserve.

"The Chinese data is very gloomy and suggests that the world economy is slowing," said Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt.

"But the market impact is rather limited as it raises hopes of more economic stimulus measures," he said. "Hopeful of central bank measures, speculative financial investors are increasingly betting on rising prices."   Continued...