Oil Above $61 After Strong U.S. Growth Beats Forecasts
Brent crude oil rose above $61 a barrel on Tuesday after data showed the U.S. economy grew at its quickest pace in 11 years in the third quarter, outweighing downward pressure from a global glut and evidence of weak demand in other parts of the world.
The Commerce Department on Tuesday revised up its estimate of U.S. gross domestic product growth to a 5.0 percent annual pace from the 3.9 percent rate reported last month, citing stronger consumer and business spending.
North Sea Brent crude has almost halved in price over the last six months as high quality crude oil from North America has overwhelmed demand. Brent reached a five-and-a-half-year low of $58.50 last week.
Brent for February LCOc1 rose $1.38 a barrel to a high of $61.49, before easing back to trade around $61.10 by 0845 ET.
U.S. light crude CLc1 rose to a session high of $56.85 a barrel in early trade before retreating to around $56.50.
Oil analysts said the positive impact of the U.S. GDP figures was helped by thin trading volume. Tuesday was a public holiday in Japan and many Western markets have slowed ahead of the long year-end break.
“The United States alone cannot steer oil out of stormy waters,” said Ehsan ul-Haq, senior market consultant at energy consultancy KBC Energy Economics.
“I hate the expression, but this might be a dead-cat bounce. If trading is thin, the market can move in any direction. I think prices will restart their downward journey in January if not at the end of December.”
As new sources of crude come on stream in North America, oil markets are exceptionally well supplied with inventories brimming in many countries.
But the Organization of the Petroleum Exporting Countries, which pumps around a third of the world's oil, has said it will not reduce production. Officials say OPEC producers are worried they will simply lose market share if they cut output.
Saudi Arabia's powerful oil minister, Ali al-Naimi, has argued it is not in the group's interest to cut oil output however far prices may fall.
“Whether it goes down to $20, $40, $50, $60, it is irrelevant,” Naimi was quoted by the Middle East Economic Survey as saying in an interview.
Arab OPEC producers expect oil to rebound to between $70 and $80 by the end of next year as a global economic recovery revives demand, OPEC delegates told Reuters this week.