Brent moves higher on strong US economic data

The front-month ICE Brent contract has gained $1.79/bbl on the day, to trade at $79.97/bbl at 09.00 GMT.

PHOTO: Oil pump jacks. Getty Images

Upward pressure:

Brent crude’s price gained on signs of steady economic growth in the US.

The US Department of Commerce revised its gross domestic product (GDP) estimates upward, a key indicator of demand growth and consumer spending activity, for the second quarter.

The US GDP increased at an annualised rate of 3% in the second quarter of this year, up from the initial estimate of 2.8%, the commerce department’s Bureau of Economic Analysis (BEA) said. The increase primarily reflected growth in consumer spending, prompting market analysts to speculate a growth in crude oil demand in the world’s largest oil-consuming nation.

“Crude oil prices rallied as robust US economic data eased concerns about weaker demand,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

Disruption to Libya’s oil production has escalated this week, adding further upward pressure on Brent’s price. Almost half of the OPEC country’s crude output, or about 700,000 b/d, was offline yesterday and exports from multiple ports were suspended, Reuters reported.

The dispute in Libya revolves around the control of its central bank, the only globally recognised depository of its oil revenues. “Oil exports from five eastern ports were suspended while the country’s output dipped further amid a battle to gain control of the central bank,” Hynes added.

Downward pressure:

Concerns over weakness in Chinese oil demand have continued to cap some of Brent’s price gains this week.

Oil consumption in China, the world’s second largest consumer dropped by 8% year-on-year to 13.55 million b/d in July, China’s General Administration of Customs (GACC) reported. This has raised concerns about the economic health of the country.

The oil market seems to be “sensitive” to bearish news from China, Hynes remarked.

By Aparupa Mazumder

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