Oil Slips Below $103 A Barrel Amid Signs Of New Recession In Europe
NEW YORK, N.Y. - Crude oil enjoyed its biggest single-day price increase since late February on Monday after a report said that U.S. factories have cranked into a higher gear.
Manufacturers are big users of diesel fuel, so increased factory activity usually means increased demand for diesel.
Benchmark West Texas Intermediate crude jumped $2.21 to US$105.23 a barrel on the New York Mercantile Exchange. It was the biggest gain since Feb. 21.
Brent crude, used to prices varieties imported by U.S. refineries, rose by $2.55 to US$125.43 a barrel in London.
Meanwhile, natural gas futures recovered after falling to a 10-year low. Futures gained 2.6 cents to US$2.15 per 1,000 cubic feet. Natural gas prices have plummeted because of a production boom that could push U.S. supplies close to their maximum capacity later this year.
U.S. manufacturing grew in March at a faster pace than February, according to the Institute for Supply Management, a trade group of purchasing managers. U.S. factories have added 100,000 jobs in the past three months to help fill a growing list of new orders.
China's manufacturers also gained momentum in March, according to a report published over the weekend.
"If they're producing, that means they're selling things," PFGBest analyst Phil Flynn said. "It means the economy is improving. We could be getting more jobs out of it in the future, and that gets people excited."
The price of oil also reflects ongoing tensions over Iran's nuclear program. Iran exports 2.4 million barrels of oil each day. The U.S. and Europe have imposed sanctions that aim to make it more difficult to finance those exports. Traders are betting that if that oil comes off the market, world supplies will tighten this year.
Saudi Arabia, Libya and Iraq are expected to help out by pumping more oil this year. But there's still a risk that the standoff in Iran could escalate "into military action that screws things up across the Persian Gulf," said Peter Donovan, a broker with Vantage Trading.
Analysts estimate that oil prices are $15 to $20 a barrel higher this year due to fears of a prolonged conflict between Iran and the West.
In other energy trading, heating oil added eight cents to US$3.25 a U.S. gallon (3.79 litres) and gasoline futures increased by 7.41 cents to US$3.3822 a gallon.
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