Crude Futures Rise on Strong US Economic Growth Indicators

A recent surge in US economic growth indicators, including a 3.5% increase in third-quarter gross domestic product, has led to a rise in crude futures prices. The news has revived investor confidence in the oil market, potentially signaling better demand in the future. However, oil market participants caution that the bounce may be fleeting, given mixed signals from other economic indicators and a surplus of crude and fuel in the market.

Key Takeaways:

• Crude futures rose $1.01, or 1.3%, to $78.47 a barrel on the New York Mercantile Exchange, while Brent crude on the ICE futures exchange traded 96 cents higher at $76.82 a barrel.
• The US Commerce Department reported a 3.5% increase in third-quarter gross domestic product, topping the average economist forecast for 3.2% growth.
• The GDP figure revived investor confidence in the oil market, potentially signaling better demand in the future.
• Crude futures have ended lower in four of the last five sessions, due to investor flows reversing out of assets vulnerable to a weaker economy and into the dollar.
• Oil prices may be settling into a new range around $80 a barrel, supported by an improving economic outlook and high inventories.
• The December meeting of the Organization of Petroleum Exporting Countries (OPEC) may see a possible increase in production if high oil prices are shown to be hurting the economic recovery.
• High inventories decrease the likelihood of an increase in members' production quotas.

Statistics:

• Crude futures rose $1.01, or 1.3%, to $78.47 a barrel on the New York Mercantile Exchange.
• Brent crude on the ICE futures exchange traded 96 cents higher at $76.82 a barrel.
• The US Commerce Department reported a 3.5% increase in third-quarter gross domestic product, topping the average economist forecast for 3.2% growth.
• Crude futures have ended lower in four of the last five sessions.
• Oil prices may be settling into a new range around $80 a barrel.

Sources:

• Dow Jones Commodities News via Comtex
• Brian Baskin, Dow Jones Newswires; 212-416-2453; brian.baskin@dowjones.com
• Dow Jones Newswires; Dow Jones & Company, Inc. Copyright 2009