Energy

Oil jumps nearly 2% on Chinese factory data, U.S. stimulus hopes

The silhouette of an oil pump is seen at sunset.
Pramote Polyamate | Getty Images

Oil rose on Monday, supported by an improvement in Chinese factory data, rising energy demand and hopes for an agreement in the United States on more coronavirus-related economic stimulus.

Brent crude rose 82 cents, or 1.9%, to $45.22 a barrel. West Texas Intermediate crude settled 72 cents, or 1.7%, higher at $41.94 per barrel.

Prices found support after U.S. President Donald Trump said House Speaker Nancy Pelosi and Senator Chuck Schumer, top Democrat in that chamber of congress, wanted to meet with him to make a deal on coronavirus-related economic relief.

The talks between Democrats and members of Republican Trump's administration broke down last week.

"The oil complex is heavily reliant on that aid. We need people to be able to boost economic activity to spur demand," said John Kilduff, partner at Again Capital in New York.

On Sunday, Saudi Arabian Aramco CEO Amin Nasser he sees oil demand rebounding in Asia as economies gradually open up.

China's factory deflation eased in July, driven by a rise in global oil prices and as industrial activity climbed toward pre-pandemic levels.

"With oil demand still slowly grinding higher, and oil supply in check due to the OPEC+ production cut deal and prices too low to incentivise strong production growth in the United States, the oil market remains undersupplied," UBS analyst Giovanni Staunovo said.

Iraq said on Friday it would cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months.

The move would help it comply with its share of cuts by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+.

"This would send out a strong signal to the oil market on various levels. That said, this would also require the international companies operating in Iraq to join in with the cuts," Commerzbank analyst Eugen Weinberg said.