Thursday, May 23, 2024

Oil prices on the rebound after two-week slump

HomeBusinessOil prices on the rebound after two-week slump

After a bruising two-week sell-off, oil staged a roaring comeback on Friday, shrugging off hot inflation data as investors latched onto a top U.S. official’s optimistic economic growth signals. Persistent Middle East tensions fueled supply anxieties, adding further upside torque.

In a dramatic reversal of the recent downdraft, Brent crude futures surged 19 cents, or 0.2%, to $89.20 per barrel as of 9:27 a.m. GMT. West Texas Intermediate (WTI) crude showed similar verve, vaulting 25 cents, or 0.3%, to $83.82.

Over the week, Brent has clawed back a stellar 2.2% while WTI has rebounded 0.8% – a wildly erratic bout that could break the losing cycle plaguing oil markets.

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The stunning about-face came after Treasury Secretary Janet Yellen expressed unbridled optimism that first-quarter U.S. GDP growth was poised for an upward revision despite footdragging data released on Thursday. Yellen waved off the paltry 1.6% gain as misleading, blaming transitory “peculiar” factors.

In a Reuters interview, the Treasury chief exuded confidence that scorching-hot inflation, which has triggered the Federal Reserve’s most aggressive tightening campaign in decades, would start cooling in the months ahead.

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While data showed the personal consumption expenditures (PCE) price index’s red-hot annual surge of 3.7% in Q1 – nearly double the prior quarter’s pace – oil traders seemed to tune out the inflationary boom for now. Yellen’s assurances about economic resilience and the likelihood of Fed rate hikes taking a breather appeared to resonate more forcefully.

Concurrently, the ever-simmering cauldron of Middle East geopolitical risks added a fresh dollop of bullish risk-premium to crude prices. The Israeli military pounded Gaza with airstrikes and threatened a full-blown ground invasion, shunning allies’ pleas to avoid escalation that could trigger humanitarian catastrophe.

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The spiraling violence stoked supply-shock jitters yet again from the perennially volatile Gulf region that wields substantial sway over global oil markets.

So after weeks of handwringing over stuttering Chinese demand and looming economic malaise, crude prices have summoned a second wind. While inflation rages unabated for now, the growth optimism has emboldened oil’s rebound – a spiral of burstiness that could upend the prevailing downbeat narrative.

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Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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