Demand in Asia underpins rise in price of crude oil

United States crude oil futures hit an 18-month high yesterday, climbing toward $86 per barrel.

Data on Friday showed US employers created jobs in March at the fastest rate in three years. Non-farm payrolls rose by 162,000, only the third increase since the U.S. economy fell into recession in late 2007 and the largest since March 2007.

US manufacturing is also expanding at its fastest pace for more than five years, while Chinese manufacturing is picking up and Japanese business sentiment is also improving. A sustained demand for gas oil, which can be used for production of diesel as part of the refining process, has triggered a surge in buying of crudes in the Asia-Pacific market.

Demand led by Chinese buyers has absorbed supplies for loading in May.

Yesterday US crude oil for May delivery rose $1.02 per barrel to a high of $85.89 in early Asian trade before slipping back to around $85.32, up 45 cents.

US crude has risen almost two per cent in the first five days of the quarter, against a rise of 5.5 per cent through the whole of the first three months of the year.

Brent crude – the North Sea benchmark oil – rose 29 cents to $84.30.

Analysts feel that a higher level of employment in the US, positive manufacturing data and signs of rising fuel demand are all likely to support oil prices and confirm crude prices in a higher trading range.

Edward Meir, a senior commodities analyst at brokers MF Global in New York, said: "Our take on crude oil prices in the short-term is that we likely will push higher from here. Technically, there is very little resistance showing on the charts given the upside breakout evident."

The prospect of better oil prices has triggered buying by funds.