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[NEW YORK] Oil rose by more than US$2 a barrel on Tuesday, rallying for a second time in three days, after data showing the fastest rate of US economic growth in 11 years bolstered expectations for crude demand.
Crude markets pared gains after preliminary data from industry group American Petroleum Institute showed a build of more than 5 million barrels in US crude stockpiles last week versus expectations for a drop. The US Energy Information Administration will release official inventory data at 10:30 a.m. ET (1530 GMT) on Wednesday.
After a brief decline in early New York trade, oil resumed an upward trend seen during its Asian and London hours, with daily gain accelerating to nearly 3 percent after release of stronger-than-expected US gross domestic product data. "I was kind of surprised that we rose that much, though the GDP data was good, as fundamentally, nothing has changed much in the oil supply situation," said Joseph Posillico, senior vice president of energy futures at Jefferies in New York. "We're likely to see more of these sort of exaggerated moves over the next week due to the thinner trading volumes around the holidays." The Commerce Department revised its estimate of US economic growth in the third quarter to a 5.0 per cent annual pace from 3.9 per cent previously. It was the fastest growth pace since the third quarter of 2003.
Traders, betting oil prices had bottomed somewhat after last Thursday's 5-1/2 year lows, pounced on the GDP data and ensuing rally in US equity markets to push up prices of both benchmark Brent oil and US crude.
Brent settled up US$1.58 at US$61.69 a barrel, continuing its rise in post settlement to US$62.14.
Brent has almost halved in value over the past six months as high quality crude from North America overwhelmed demand. It hit 5-1/2 year lows of US$58.50 last week.
US crude finished the session up US$1.86 at US$57.12, and rose thereafter to as high as US$57.56.
After the API data, both Brent and US crude pared about 50 cents in gains.
Some analysts say Brent's apparent floor at near US$60 is an illusion as a much deeper sell-off is on the cards technically.
Arab producers in OPEC expect oil to rebound to between US$70 and US$80 by the end of next year as a global economic recovery revives demand, OPEC delegates told Reuters this week.