Crude oil futures turned higher on Tuesday, as investors reacted to upbeat manufacturing data from the euro zone.
On the ICE Futures Exchange in London, Brent oil for May delivery climbed 66 cents, or 1.17%, to trade at $56.58 a barrel during European morning hours.
Oil hit the highest levels of the session after data showed that the euro zone’s economic recovery gathered further momentum in March, adding to signs that the European Central Bank’s quantitative easing is stimulating the real economy.
Research group Markit reported that the euro zone’s manufacturing purchasing managers’ index improved to a ten-month high of 51.9 this month, up from a final reading of 51.0 in February.
The report said the PMI surveys pointed to economic growth of 0.3% in the current quarter, buoyed by a 0.4% expansion in Germany and signs of a long-awaited recovery in France.
German manufacturing sector activity rose to an eight-month high this month, while France’s private sector had expanded for a second straight month.
Oil prices were lower earlier in the session after data showed that Chinese manufacturing activity swung into contraction territory this month.
The preliminary reading of China’s HSBC (LONDON:HSBA) manufacturing index dropped to an 11-month low of 49.2 in March, below the 50-point level that separates growth in activity from contraction. Analysts had expected a reading of 50.6, down slightly from February’s reading of 50.7.
The disappointing data fuelled speculation policymakers in Beijing will have to introduce further stimulus measures to boost growth and spur economic activity in the world’s second largest economy.
Elsewhere, on the New York Mercantile Exchange, crude oil for delivery in May rose 67 cents, or 1.41%, to trade at $48.12 a barrel, the most since March 13.
Crude oil futures reverse higher after upbeat euro zone PMIs
Market participants looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles rose by 3.8 million barrels in the week ended March 20.
Total U.S. crude oil inventories stood at 458.5 million barrels as of last week, the most in at least 80 years, underling concerns over a supply glut.
Meanwhile, the spread between the Brent and the WTI crude contracts stood at $8.46 a barrel, compared to $8.47 by close of trade on Monday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.2% to 97.01 early on Tuesday.
The greenback remained under pressure amid uncertainty over the path of U.S. monetary policy after the Federal Reserve downgraded its forecasts for growth and inflation and lowered its interest rate projections last week.
Later in the day, the U.S. was to release reports on consumer inflation and new home sales as investors look for more clues over the strength of the economy.