Oil near $88 amid signs of Asia economic strength
Oil prices rose to near $88 a barrel Monday amid signs of resilience in the economies of Japan and China and optimism about a plan to handle the European sovereign debt crisis.
By early afternoon in Europe, benchmark crude for December delivery was up 38 cents at $87.78 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.33 to settle at $87.40 in New York on Friday.
In London, Brent crude was up 60 cents at $110.16 a barrel on the ICE Futures exchange.
Japan's Finance Ministry said Monday that exports rose 2.4 percent in September from a year earlier, marking the second consecutive month of growth as the country recovers from the March earthquake and tsunami.
Meanwhile, HSBC said its preliminary China Manufacturing Purchasing Managers Index, which measures industrial production, rose to 51.1 from 49.9 in September. A result above 50 indicates an expansion from the previous month. The preliminary indicator is often subject to substantial revision.
Analysts at Commerzbank in Frankfurt, however, cited Chinese customs data showing that the country's imports of crude oil fell by 1.6 percent in the third quarter of 2011 compared to the same period in 2010.
"From a fundamental point of view, the biggest positive factor on the demand side" seems to be fading, said a report from Commerzbank.
Investors are also closely watching for clues about a plan to contain Europe's debt crisis. European leaders didn't give details of the plan after meeting Sunday but are expected to do so Wednesday.
"Oil is moving tick-for-tick with global equity markets, which in turn, are gyrating with the latest headline handicapping the euro bailout fund," energy trader and consultant The Schork Group said in a report.
Some analysts were skeptical about the debt management plan, saying higher prices were mainly a consequence of "buy the rumor, sell the fact," where bullish rumors lift prices and then fall sometimes even if the rumors are confirmed.
"It's no surprise, therefore, that sentiment has improved further ... because of the prospect of a 'final solution to the debt crisis' coming on Wednesday," Commerzbank said. "We see no grounds for this optimism and therefore believe the downside risks for the price of oil are high."
In other Nymex trading, heating oil rose 1.16 cents to $3.0275 per gallon and gasoline futures advanced 1.46 cents at $2.6728 per gallon. Natural gas gained 2.3 cents to $3.652 per 1,000 cubic feet.