London: Oil rose more than $1 on Friday, taking benchmark US crude futures back above $100 per barrel, after much higher-than-expected growth in Germany and France and a rebound in the euro against the dollar.
Energy markets have been on a roller-coaster ride over the last week as investors have reassessed the outlook for global growth and the risk of supply disruptions in the Middle East.
Strong growth data from the euro zone on Friday encouraged investors to move back into oil, which has tumbled more than $20 over the last week but recouped some of those losses.
The growth figures helped boost the euro and depressed the dollar, which often moves inversely to oil because many forms of energy are priced in the US currency on international spot markets.
US light crude oil futures for June rose $1.73 per barrel to a high of $100.70, before easing back to trade around $100.20 by 02:20 pm. The contract has traded between $94.63 and $114.83 over the last two weeks with huge volatility each day.
June Brent slipped to a low of $112.26 before rebounding to $114.92 and traded around $114.30 at 02:20 pm.
“Very healthy numbers out of the euro zone this morning are supporting oil and have pushed the euro through key resistance against the dollar,” said Robert Montefusco, commodities broker at Sucden Financial in London.
“US crude is not far below its 100-day moving average at $100.81 and that’s a target in the short term.”
The dollar index, which measures the US currency against a basket of currencies, fell 0.5% to 74.860, after hitting a three-week peak of 75.645 on Thursday.
Analysts expect the oil market to continue witnessing the same volatility next week as in the past few days, driven partly by the dollar due to uncertainty surrounding growth in the US and European economies.
Historical close-to-close volatility for Brent and US crude has rocketed to well over 60% after two years of declining price moves.
Storming performances by the German and French economies in the first quarter highlight the yawning gap between the euro zone’s strong and weak and suggest the forecast for growth in the bloc is well under par.
Germany, Europe’s largest economy, grew by a startling 1.5% in the first three months of the year, data showed on Friday, with France growing by 1.0%. Growth of 0.9% and 0.6% had been forecast respectively.
Trade volumes, which have been strong over the past week, held well above recent levels, with Brent trade 56% over the 30-day moving average and US crude 35% over that average.
Investors have been concerned that China’s battle with inflation may start to trim demand from the world’s second largest oil consumer.
China’s central bank raised the reserve requirements for commercial banks by another 50 basis points as it pursued a campaign to fight inflation despite initial signs of a slowing economy.
The International Energy Agency, adviser to 28 industrialized nations, has trimmed its global oil demand growth estimates for this year by 1.5% to 1.29 million barrels per day, noting gasoline pump prices near $4 a gallon prompt Americans to drive less.
“There are concerns China might be tightening too much, that demand might be falling and high prices might be starting to affect demand,” said Tony Nunan, a risk manager with Mitsubishi Corp. in Tokyo.
Earlier this week, gasoline inventories posted a surprise build, the first rise in stocks after 11 consecutive declines, according to the Energy Information Administration.