Oil rises as US retail sales ease recession fears

A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.

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Crude oil prices rose more than 1% on Friday following two days of declines, buoyed after data showing an increase in retail sales in the United States helped dampen concerns about a recession in the world’s biggest economy.

Brent crude was up 68 cents, or 1.2%, at $58.91 a barrel at 0650 GMT, after falling 2.1% on Thursday and 3% the previous day.

U.S. crude was up 63 cents, or 1.2%, at $55.10 a barrel, having dropped 1.4% the previous session and 3.3% on Wednesday.

U.S. retail sales rose 0.7% in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, according to data that came a day after a key part of the U.S. Treasury yield curve inverted for the first time since June 2007, prompting a sell-off in stocks and crude oil.

An inverted Treasury yield curve is historically a reliable predictor of looming recessions.

« The rebound has a corrective look about it on thin volumes, rather than a beachhead for an impending rebound, » said Jeffrey Halley, senior market analyst at OANDA. « Overall, U.S. data continues to be a bright spot in a dark economic universe. »

Gains are likely to be capped after a week of data releases including a surprise drop in industrial output growth in China to a more than 17-year low, along with a fall in exports that sent Germany’s economy into reverse in the second quarter.

« The broader story around global economic growth has been a weak one, or a weakening one and expectations (are for) further weakening, » Phin Ziebell, senior economist at National Australia Bank, said by phone.

The price of Brent is still up nearly 10% this year thanks to supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, a group known as OPEC+. In July, OPEC+ agreed to extend oil output cuts until March 2020 to prop up prices.

« At what point will further output cuts be needed at the back end of this year from OPEC and Russia to keep things going the way they are? » Zeibell said, pointing to the broader economic outlook.

A Saudi official on Aug. 8 indicated more steps may be coming, saying:  « Saudi Arabia is committed to do whatever it takes to keep the market balanced next year ».

But the efforts of OPEC+ have been outweighed by worries about the global economy amid the U.S.-China trade dispute and uncertainty over Brexit, as well as rising U.S. stockpiles of crude and higher output of U.S. shale oil.

Source: CNBC

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