Amidst the news that manufacturing unexpectedly strengthened in China, the world’s second-largest crude consumer, West Texas Intermediate oil advanced for a second day. Now, its growth is the biggest monthly gain since August 2012. Other factors such as shrinking crude stockpiles and better-than-expected growth in the U.S., the world’s biggest oil-consuming country also contributed to the rise.
Positive Indications from the U.S. National Economy
The WTI’s gain has also been pointed to the government data that showed that the U.S. gross domestic product grew more than what was predicted. Additionally, crude stockpiles at Cushing, Oklahoma, the main American depot, recorded the highest fall and fell to a 15-month low last week. On the other hand, after climbing the most in three weeks, the futures climbed as much as 0.6 percent in New York.
Thus, the gain is motivated by China’s PMI and better GDP figure from the U.S. Amidst the Federal Reserve’s decision to keep the pace of its bond-buying intact to boost the economy, crude options volatility is under control as it went down quite significantly as futures jumped 1.9 percent.
As was expected, WTI crude for September delivery rose $1.95 and finally settled at $105.03 a barrel on the Nymex amidst the news that the Fed has pledged to keep buying $85 billion in bonds every month as it believes that persistent low inflation could hamper the economic growth.
The decision on the part of the Fed has also encouraged investors who were worried about the continuance of the pledge. On the New York Mercantile Exchange, WTI for September delivery grew to 65 cents to $105.68 a barrel in electronic trading which was at $105.53 at noon in Sydney.
Better Prospects for Crude Markets
Supported by positive economic growth of the US and a draw on Cushing inventories, crude markets seem on the right track. As the national economy grew at 1.7%, higher than the expected 1%, crude prices are expected to rise. The EIA reported that whereas total U.S. Inventories rose 431,000 barrels, Cushing stockpiles fell by 1.9 million barrels.
The major contributors in draw in Cushing inventories are the pipelines and railroads that continue to alleviate the flood of oil; this has however helped to narrow the spread between WTI and Brent. The Cushing storage hub, the pricing point for WTI, helped the latter gain a solid $1.95 to settle at $105.03/bbl.
To contact the reporter of this story: Jonathan Millet at email@example.com