By Ambar Warrick
Investing.com -- Oil prices rose on Wednesday as stronger-than-expected Chinese economic data drummed up hopes for a demand rebound in the country, helping markets look past signs of another large build in U.S. inventories.
China’s composite purchasing managers’ index (PMI), a key indicator of business activity, surged to an over three-year high in February, government data showed. The reading was boosted by bigger-than-expected rises in both manufacturing and non-manufacturing PMIs.
The data indicate that an economic recovery in the world’s largest oil importer is gaining steam after it relaxed most anti-COVID measures earlier this year.
Brent oil futures rose 0.9% to $83.81 a barrel, while West Texas Intermediate crude futures rose 0.4% to $77.38 a barrel by 21:26 ET (02:26 GMT). Both contracts extended gains into a second straight session.
The strong Chinese data fed into bets that a recovery in the Asian giant will drive oil demand to record highs in 2023. This notion also supported oil prices in recent sessions, with prices rallying as much as 2% on Tuesday.
The data also helped markets look past a softer-than-expected economic growth reading from major crude importer India.
On the supply side, industry data showed that U.S. oil inventories likely grew for a 10th consecutive week, pointing to a supply glut in the world’s largest oil consumer.
Data from the American Petroleum Institute showed crude inventories grew by a far bigger-than-expected 6.2 million barrels in the week to Feb 24, heralding a similar rise in government data due later in the day.
The reading, coupled with signs of slowing U.S. gasoline demand, indicates that crude consumption in the world's largest oil consumer remains under pressure, as the country grapples with high inflation and rising interest rates.
Concerns that this trend - particularly rising interest rates - could dent economic growth and in turn, crude demand, have hounded oil prices in recent sessions. Markets also fear that a recession in the rest of the globe could largely offset a demand rebound in China.
Focus this week is now on U.S. business activity indicators for February, due on Wednesday and Friday. Manufacturing activity is expected to have contracted, offsetting strength in the services sector.
Economic indicators from around the globe, including euro zone PMIs and consumer inflation, are also due this week, and are expected to provide more cues on the global economy.