Crude oil prices surged higher than two per cent on Friday, improving from two days of slumps after data showing a rise in U.S. retail sales helped to relieve concerns about a recession in the world’s biggest economy.
Brent crude LCOc1 was up two at $59.48 a barrel at early trading, after falling 2.1% on Thursday and three per cent the previous day.
U.S. crude CLc1 was also 2% higher at $55.60 a barrel, having dropped 1.4% in the previous session and 3.3% on Wednesday.
U.S. retail sales rose 0.7% in July as consumers bought a range of goods even as they cut back on motor vehicle purchases on Thursday’s data showed.
That came a day after a sell-off in world markets that followed the U.S. Treasury yield curve’s first inversion since June 2007 – a development usually seen as a reliable predictor of a looming recession.
“The rebound has a corrective look about it on thin volumes, rather than a beachhead for an impending rebound,” Jeffrey Halley, senior market analyst at OANDA, said.
“Overall, U.S. data continues to be a bright spot in a dark economic universe.”
World stocks also rose on Friday as expectations grew for further stimulus by central banks, offsetting worries about slowing economic growth.
Gains are likely to be capped after a week of data releases included a surprise drop in industrial output growth in China to a more than 17-year low and a fall in exports that sent Germany’s economy into reverse in the second quarter.
“The broader story around global economic growth has been a weak one, or a weakening one, and expectations (are for) further weakening,” said Phin Ziebell, senior economist at National Australia Bank.
The price of Brent is still up nearly 10% this year thanks to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, a group known as OPEC+.
In July, OPEC+ agreed to extend oil output cuts until March 2020 to prop up prices.
“At what point will further output cuts be needed at the back end of this year from OPEC and Russia to keep things going the way they are?” Ziebell said.
A Saudi official indicated this month that more steps may be coming, saying Saudi Arabia was committed to doing “whatever it takes” to keep the market balanced next year.
OPEC’s efforts have been undermined by worries about a slowing global economy amid a trade dispute between the United States and China, as well as rising U.S. stockpiles of crude and higher output of U.S. shale oil. (Reuters/NAN)
