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Petroleum industry

Oil Futures Surge on Strong Housing Starts and Global Uncertainty

Strategic Insights

— 1 min read

Oil futures jumped in early trading as the US housing starts report showed a surge in home building, a positive sign for the economic recovery. The market was also lifted by concerns over unrest in an oil-producing province of Kazakhstan and a possible meeting of world leaders to discuss sanctions on Iran's oil exports. The surge in oil prices was accompanied by a rise in equity markets, with the Dow Jones Industrial Average jumping 149 points at the start of trading.

Key Takeaways:

  • Oil futures rose by more than 3% in early trading, with light sweet crude for January delivery up $2.92 to $96.80 a barrel on the New York Mercantile Exchange.
  • The housing starts report showed a 9.3% increase to a seasonally adjusted annual rate of 685,000, the highest level in 19 months, exceeding economists' expectations of a 0.3% rise.
  • The market was also influenced by unrest in Kazakhstan, where the government declared a state of emergency in the oil-producing town of Zhanaozen after clashes between laid-off oil workers and security forces.
  • World leaders met in Rome to discuss sanctions on Iran's oil exports, with Iran being the second-largest exporter of crude in the Organization of Petroleum Exporting Countries, supplying 2.5 million barrels per day to the world.
  • Analysts and traders attributed the market's bounce to improved sentiment about Europe's financial stability and the US economic recovery, with Tradition Energy's Gene McGillian saying "It does seem that the fears that bubbled up to the surface last week have subsided a bit."
  • Stocks rose as the market opened, with the Dow Jones Industrial Average surging 149 points in the first minute of trading.

Statistics:

  • Light, sweet crude for January delivery rose by 3.1% to $96.80 a barrel on the New York Mercantile Exchange.
  • Brent crude on the ICE Futures Europe exchange rose by 2.8% to $106.56 a barrel.
  • Housing starts increased by 9.3% to a seasonally adjusted annual rate of 685,000, the highest level in 19 months.
  • Equities rose, with the Dow Jones Industrial Average surging 149 points at the start of trading.
  • Iran supplies 2.5 million barrels per day of oil to the world, making it the second-largest exporter of crude in the Organization of Petroleum Exporting Countries.

Sources:

  • Dow Jones Commodities News via Comtex
  • Dow Jones
  • Tradition Energy
  • The Commerce Department
  • Bloomberg News Service

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