Oil Prices Surge Amid US Strikes, Lackluster Chinese Manufacturing Data

Strikes at US oil refineries, together with China's poor manufacturing data dealt a blow to oil prices in the beginning of the week. However, as investors shifted their attention to the sharp decline in the number of US rigs, oil prices mounted above $55 per barrel.

MOSCOW, February 2 (Sputnik), Ekaterina Blinova — Strikes at US oil refineries, along with China's poor manufacturing data, dealt a blow to oil prices in the beginning of this week; however, as investors shrugged the news off, Brent crude has rallied to over $55 per barrel.

"There were a lot of people on the sidelines waiting for an opportunity to buy. Brent has moved sideways for a while but it closed above the 20-day moving average on Friday for the first time since July, and that has encouraged people to come in," said Bjarne Schieldrop, chief commodity analyst at SEB, as cited by Reuters.

Led by the United Steelworkers union, workers at nine American oil refineries, which produce about 10 percent of the country's gasoline, launched a strike on Sunday, citing security concerns and salary issues. The mass action became the largest oil industry worker strike since 1980. Although such refineries as Royal Dutch Shell PLC., Tesoro Corp., Marathon Petroleum Corp. and LyondellBasell Industries announced they would keep operating, the move sparked concerns among investors, the Wall Street Journal elaborates. According to Bloomberg, "while only one of the nine plants has curbed production amid the stoppage, a full walkout of USW workers would threaten to disrupt as much as 64 percent of U.S. fuel output."

On the other hand, oil prices had been struck by China's dipping manufacturing indices, according to experts. The HSBC manufacturing purchasing managers index still remains below the 50 level, pointing to the state's production slowdown, the media outlet claims.

"We think demand in the manufacturing sector remains weak and more aggressive monetary and fiscal easing measures will be needed to prevent another sharp slowdown in growth," said Hongbin Qu, HSBC's chief economist for China, as quoted by the Wall Street Journal.

Amid growing fears regarding a slowdown in demand, experts are calling attention to another important trend – a tremendous decline in the number of American drilling rigs.

"Drilling rigs in North America may fall by 30% to 40% this year, along with spending cuts of a similar magnitude among oil companies, which should support a recovery in oil prices by the end of the year," the Wall Street Journal emphasizes, citing Gordon Kwan, head of oil research at Nomura, a financial holding company.

It looks like the negative prognosis has overshadowed both China's dipping manufacturing data and the news about the US oil refinery strike, exposing a potential forthcoming decrease in oil production. Thus far, the prices have risen above $55 per barrel, experts underscore.