Oil rises 2% as recession fears recede

Drilling rigs operate at sunset in Midland, Texas, US. Photograph:( Reuters )

Reuters Moscow, Russia Aug 16, 2019, 03.52 PM (IST)

Crude oil prices rose more than 2 per cent on Friday, recovering from two days of declines after data showing a rise in US retail sales helped to ease concerns about a recession in the world's biggest economy.

Brent crude was up 2 per cent at $59.48 a barrel at 0924 GMT, after falling 2.1 per cent on Thursday and 3 per cent the previous day. 

US crude was also 2 per cent higher at $55.60 a barrel, having dropped 1.4 per cent in the previous session and 3.3 per cent on Wednesday.

US retail sales rose 0.7 per cent in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, Thursday's data showed.

That came a day after a sell-off in world markets that followed the US Treasury yield curve's first inversion since June 2007 - a development usually seen as a reliable predictor of a looming recession.

"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, US data continues to be a bright spot in a dark economic universe."

World stocks also rose on Friday as expectations grew for further stimulus by central banks, offsetting worries about slowing economic growth.

Gains are likely to be capped after a week of data releases included a surprise drop in industrial output growth in China to a more than 17-year low and 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," said Phin Ziebell, senior economist at National Australia Bank.

The price of Brent is still up nearly 10 per cent 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?" Ziebell said.

A Saudi official indicated this month that more steps may be coming, saying Saudi Arabia was committed to doing "whatever it takes" to keep the market balanced next year.

OPEC's efforts have been undermined by worries about a slowing global economy amid a trade dispute between the United States and China, as well as rising US stockpiles of crude and higher output of US shale oil.

Story highlights

Brent crude was up 2 per cent at $59.48 a barrel at 0924 GMT, after falling 2.1 per cent on Thursday and 3 per cent the previous day.