Oil prices were steady above $78 a barrel yesterday on expectations that Chinese economic indicators to be published this week will signal strong demand growth from the world's second-largest oil consumer.
China's industrial output probably jumped by 20 per cent in the year to December from November's figure of 19.2 per cent, a Reuters survey showed. That would be the fastest pace since February 2006.
Front-month US crude futures settled on Friday below the 50-day moving average for the first time in three weeks and bounced back, setting an important support level at $78, said Mark Pervan, senior commodities analysts at ANZ.
US crude futures for February delivery climbed as much as 68 cents from Friday's close of $78, and were trading up 15 cents at $78.15 by 0751 GMT.
They touched a three-week intraday low of $77.07 yesterday. Oil prices are still nearly 47 per cent off their July 2008 high of more than $147 a barrel.
Nymex will combine prices for yesterday and today into a single trading session because of the Martin Luther King Day holiday. "There is growing expectation that the Chinese data will surprise on the upside," said Pervan from Melbourne, Australia.
"This means reasonably strong commodities markets and oil is taking a lead from that."
A weaker dollar encouraged riskier trades in commodities. "That is also positive for the oil market," Pervan added.
The Nymex February contract expires tomorrow. March futures, the front-month contract as of Thursday, rose 10 cents to $78.47 a barrel.
The dollar fell to ¥90.51, hitting a four-week low.
London Brent crude futures for March delivery fell 28 cents to 76.82, after trading little changed yesterday. A higher-than-expected figure for China's industrial output could be interpreted as a reason for China's central bank to tighten monetary policy, especially after it announced higher reserve requirements last week. But the bearish effect of tightening measures on energy consumption will be more than compensated by sustained strong economic growth, Pervan said.
The Chinese economic data, including inflation, producer prices and retails sales, will be published on Thursday.
China's crude oil imports will probably rise 15 per cent this year from 2009 as the country.
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