Singapore: Oil jumped by more than $1 on Friday to extend gains above $71 a barrel, in line with rising equity markets as economies worldwide appeared to be on the path to recovery.
Hopes that the worst of the recession was over helped oil rise for the third day in a row, leaving prices headed to end the week slightly higher than a week ago.
Optimism infected all markets, with Japan’s Nikkei average hitting its highest in 10 months to end the morning session up 1.05%, as investor confidence was further reinforced after Europe’s biggest economies, Germany and France, ended their recessions in April-June, earlier than expected.
US light crude for September delivery was up 43 cents at $70.95 a barrel by 0306 GMT, having earlier risen by as much as $1.08 to $71.60, adding to a 36-cent gain on Thursday.
London Brent crude rose 47 cents to $73.95.
“There is mounting evidence that the recession is over and that a phase of rapid growth in OECD industrial metals and energy demand is imminent,” Barclays Capital analysts said in a commodities research report.
Oil has more than doubled from the low $30s of this winter, supported by hopes that recovery from the deepest financial crisis in decades was at hand that triggered an equity rally.
News that the eurozone’s two largest economies were heading out of recession comforted hopes, coming a day after the US Federal Reserve made its clearest statement yet that it sees the recession nearing an end.
Oil demand may be close to rebounding, too.
“Beyond the macroeconomic optimism, oil fundamentals have also brightened, with refinery margins globally lifting over the past three weeks amid impoved light product cracks,” said J.P. Morgan analysts in their weekly oil markets report.
Potentially further tightening supplies in the United States, the National Hurricane Center said on Thursday that the Atlantic may get its first named storm of the year as a tropical wave off of West Africa gains strength.
Tropical storms and hurricanes can disrupt operations at offshore platforms and coastal refineries.
But not all data signalled a rebound.
US data on Thursday showed nationwide retail sales dipped slightly in July and the number of US workers filing new claims for jobless benefits rose unexpectedly last week, capping the bullish mood.
US crude and products inventories also remain at high levels, with crude stocks unexpectedly rising last week according to the US Energy Information Administration, while gasoline inventories fell by less than expected.