Global oil prices rally on stimulus hopes

Oil prices rallied Thursday as hopes of a Chinese stimulus soared after manufacturing activity in the world's largest energy consumer fell to a nine-month low in August, analysts said. New York's main contract, light sweet crude for October rallied to $98.29 per barrel in morning deals, reaching a summit last seen on May 4. It later stood at $98.03, up 77 cents from Wednesday's closing level. Brent North Sea crude for delivery in October meanwhile jumped $1.36 to $116.27 a barrel. "The 'great stimulus hope' rally continues, aided by persistent dollar weakness," said Sucden analyst Jack Pollard. The weaker greenback makes dollar-priced oil cheaper for buyers using stronger currencies. Oil markets, which have also been buoyed by hopes of additional stimulus from the US Federal Reserve, were given a further boost from heightened optimism that China's central bank would do the same. "Energy markets have been pretty sluggish, given the renewed hopes of QE3 from the Fed. They needed an excuse to rise and they found it today in weak China flash PMI data," said IG Markets Singapore strategist Justin Harper. "The weak manufacturing data today has excited oil traders that... stimulus may be on its way soon, to revive flagging activity in the world's factory," he told AFP. Preliminary figures released Thursday from the closely watched HSBC purchasing managers' index (PMI), which gauges nationwide manufacturing activity, hit 47.8 this month, its lowest since November. This raised trader hopes that the Chinese government would intervene with policy easing measures to kick-start growth, traders said. In the US, hopes for a fresh round of quantitative easing from the Fed were boosted Wednesday when minutes of the Federal Open Market Committee's most recent policy meeting were published, dealers said. The minutes said: "Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial strengthening in the pace of the recovery."