12:43 | 28/08/2015 Global Economy
World oil prices surged more than 10 per cent on Thursday after strong US economic growth data lifted confidence about the world's biggest economy and petroleum user.
US oil prices surged more than 10 percent on Aug 27, 2015, climbing back above US$40 a barrel after strong American economic growth data lifted confidence about the world's biggest economy and petroleum user. (AFP Photo)
NEW YORK: World oil prices surged more than 10 percent on Thursday (Aug 27) after strong US economic growth data lifted confidence about the world's biggest economy and petroleum user.
US benchmark West Texas Intermediate (WTI) for delivery in October jumped US$3.96 to US$42.56 a barrel. European benchmark Brent oil for October delivery gained US$4.42 at US$47.56 a barrel in London.
Both WTI and Brent closed up 10.3 percent from Wednesday's settlements. US prices had been at or near six-and-a-half year lows all week, with WTI closing below US$40 on Monday for the first time since 2009 and staying there through Wednesday.
The rally came after the Commerce Department reported the US economy expanded at an annual rate of 3.7 percent in the second quarter, much above the initial appraisal of a 2.3 percent gain.
The more robust April-June growth mainly reflected higher investment, state and local government spending, and consumer spending than was reported in the initial estimate.
The data is "really waking people up over the fact that we're a growing country and demand is going to get better here," said Carl Larry of Frost & Sullivan. "We're probably underpricing crude as it is," Larry said. "We're seeing a lot of demand here, economic growth has been strong. We're seeing lots of numbers showing signs of positive reaction."
The strong US economic figures also added momentum to a global stock market rally that lifted bourses that have lost trillions of dollars in value in a rout over the last week or so.
Analysts said the oil contract also benefited from technical factors after recent trades left the commodity in an "oversold" state and lingering below the psychologically important US$40 a barrel level.
"Buyers who had backed off from trying to catch the prior dynamic decline are now stepping back in," said Tim Evans, analyst at Citi Futures, who described the dynamic as a long-awaited technical correction to the upside./.