Oil tops $86 with surging Chinese economy
Singapore, April 15, 2010
Oil rose past $86 on Thursday, putting it less than a dollar short of 18-month highs as surging Chinese economic growth cemented expectations of a rebalancing of a market awash with supplies.
China's economy grew at the fastest pace since 2007 in the first quarter, although the scorching growth does raise the prospect of further monetary tightening to counter risks of overheating.
The data followed a surprise drop in US crude inventories by 2.2 million barrels last week reported by the Energy Information Administration (EIA) on Wednesday, snapping ten straight weeks of gains.
Appetite for riskier assets including commodities also increased after stronger-than-expected company results, including from JPMorgan Chase and Intel, drove US stocks to a fifth straight day of gains.
Front-month US crude rallied 30 cents to $86.14 a barrel at 0300 GMT, just shy of the $87.09 peak reached last week, while ICE Brent gained 30 cents to $86.45.
"The market is relieved that at least on the supply side the fundamental picture is looking better after the largely unexpected US inventory draw," said Ben Westmore, a commodities analyst at the National Australia Bank.
"The demand side is going to get more attention with the macro data coming out of the big consuming countries. Non-OECD demand, especially from China and other east Asian countries, has been very strong and the market is waiting for North America to catch up," Westmore said.
Oil prices rallied more than 2 per cent on Wednesday, ending a five-day losing streak, helped by positive corporate earnings and upbeat retail sales data for March -- fresh indications that the US economic recovery was taking hold.
Opec, in its monthly report, said economic optimism was driving prices and that it saw a "very comfortable outlook" for oil fundamentals. The group also nudged up its forecast for 2010 oil demand growth.
Investors will watch data on weekly jobless benefit claims to gain further insight into how the labor market is faring as the economy stages a gradual recovery. – Reuters