Join our community of traders FOR FREE!

  • Learn
  • Improve yourself
  • Get Rewards
Learn More

Oil rises on U.S. economy outlook

Oil_rigWTI rose on Friday, extending Thursdays gains as positive economic outlook in the U.S., the worlds top consumer, boosted demand prospects. Brent oil also rose as comments by Fed governors eased concern the central bank will curb its bond purchasing program. The European benchmark is headed for a first monthly gain since 5 months, but is still on route for a third straight quarterly loss.

On the New York Mercantile Exchange, WTI crude for August delivery traded at $97.49 a barrel at 7:17 GMT, up 0.45% on the day. Prices ranged between days high and low at $97.52 and $96.55 respectively. Light, sweet crude gained 1.48% yesterday, and is up more than 3.7% for the week so far after declining by 4.04% last week as the stronger dollar pressured most of the dollar-priced commodities.

Meanwhile, Brent oil August futures gained 0.28% on the day by 7:17 GMT. The European benchmark traded at $103.11 a barrel, varying between days high and low at $103.21 and $102.45 respectively. Brent settled 0.92% higher yesterday and is up more than 2% for the week after plunging 4.64% during the preceding one.

Oil prices were supported yesterday by positive U.S. data, which pointed at sustainable recovery of the countrys economy, offsetting Wednesdays disappointing GDP Q1 reading. According to the Department of Labor, Initial Jobless Claims mismatched projections of a 10 000 decrease by 1 000. The number of people who filed for unemployment assistance in the U.S. last week fell to a seasonally adjusted 346 000, compared to the previous period’s 355 000 revised reading, but slightly above projections of 345 000. Personal Income for May surpassed expectations of 0.2% and surged to 0.5%, up from April’s revised 0.1% figure. Personal Spending for May met anticipations at 0.3%, well above the preceding month’s revised reading of -0.3%. Core PCE (Core Personal Consumption Expenditures) met projections both on monthly and annual basis. Core PCE for May stood at 0.1%, up from April’s 0.0% and was 1.1% higher than May 2012. Upbeat data pointed at sustainable demand prospects for oil, pushing prices up.

Victor Shum, the vice president at IHS Energy Insight, said for Bloomberg: “Right now it seems like the bulls are in control. Oil futures appear to be trading with the broader market.”

Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts said yesterday for Bloomberg: “The oil price is held up by expectations of a better economy and higher demand. As long as we have good economic data coming out, it’s hard for oil to go lower.”

Meanwhile, oil prices drew support from Fed governors comments yesterday that eased investors concerns about a premature deceleration of the central banks monetary stimulus. Oil prices have been largely tracking shifting expectations of Federal Reserves intentions to wind down Quantitative Easing as it is the main factor that determines the dollars strength. The greenback trades inversely to dollar-priced commodities as strengthening of the currency reduces the raw materials appeal and makes them more expensive for foreign currency holders.

Investors are now looking ahead to next weeks key U.S. and China economic data. U.S. Non-Farm Payrolls will bring additional clarity about the state of the U.S. labor market. Meanwhile, Chinas official Purchasing Managers Index is due on Monday. According to a Reuters poll, it should have fallen to 50, down from Mays 50.8 final reading. Chinas economy experienced a cash squeeze recently, which the central bank reassured will be handled. The country had its GDP growth forecast further trimmed by Goldman Sachs, but positive news on Thursday about industrial companies increasing their profits made prospects a bit more bright.

TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

Related News