Crude Oil futures rose sharply Tuesday, lifted by a report indicating growth in China’s manufacturing sector and continued tensions between Iran and the West. Light, sweet crude for February delivery rose $3.05, or 3.1%, to $101.88 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe traded $3.37, or 3.1%, to $110.74 a barrel.
Futures began the first trading day of 2012 higher, as an unexpected expansion in Chinese manufacturing activity eased concerns about a slowdown in the world’s second-largest Oil consumer. The country’s official Purchasing Managers Index rose to 50.3 in December, up from 49 in November, lifted by a pick-up in activity ahead of the holidays.
A reading above 50 indicates an expansion in manufacturing activity. The sub-50 reading for November had left many investors concerned that economic activity might be easing in China, where brisk growth has underpinned Crude Oil prices over the last year, even as the U.S. and Europe have struggled. The U.K., meanwhile, reported a better-than-expected PMI of 49.6 for December, a higher reading than November, marking a welcome piece of good news for Europe’s manufacturers.
Separately, Oil prices remained supported by escalating tensions between Iran and the West. On Saturday, President Barack Obama signed into law sanctions against Iran’s central bank. Later in the weekend, Iran conducted missile tests in the Strait of Hormuz, the site of several days of war games and the channel through which a third of the world’s waterborne Crude passes.
Tensions with Iran have risen over the last several months over the country’s nuclear program. Iran says the program is for peaceful purposes only, but the International Atomic Energy Agency asserted in a report late last year that the country appeared to be taking steps toward developing a nuclear weapon.
Iran is the world’s third-largest exporter of Oil, and Western countries have since discussed the possibility of additional sanctions on the country’s energy industry.
EasyForexNews Research Team