By Irina Slav
Solid economic growth figures from the U.S. and news about China’s economic stimulus combined this week to push oil prices higher.
Benchmarks could post their biggest weekly rise since October this week, Reuters said, with supply uncertainty in the Middle East contributing to the bullish sentiment.
U.S. GDP in the fourth quarter of last year expanded by 3.3%, which was substantially higher than what analysts had expected, which was 2% growth.
Meanwhile, in China, the central bank said it would inject the equivalent of $140 billion into the economy to stimulate faster growth by cutting the amount of reserves local banks need to hold.
In the Middle East tensions continue running high, with the Yemeni Houthis striking a U.S.-owned cargo vessel this week following the second round of attacks on targets in Yemen by U.S. and UK forces.
Earlier this week reports emerged that Washington had asked Beijing to talk to Tehran and get the Iranians to convince the Houthis to stop attacking ships in the Red Sea. These reports were followed by news, based on unnamed sources, that Chinese officials had approached Iran’s leadership with a request to tell the Houthis to dial down the anti-ship violence.
“Basically, China says: ‘If our interests are harmed in any way, it will impact our business with Tehran. So tell the Houthis to show restraint'” one source from the Iranian government told Reuters.
Chinese vessels are not targets for the Houthis but the disruption of traffic in the Red Sea has hurt Chinese exporters by significantly lengthening the time needed for their goods to reach their end destination in Europe, adding to costs.
Oil traders appear to have finally started noticing these developments and have factored the disruption into their trading decisions.
On Thursday, Brent crude topped $80, jumping above $82 before retreating somewhat, and West Texas Intermediate reached a two-month high of some $77 per barrel on Thursday. Prices fell back slightly on Friday morning but remained elevated for the week.
NB: Irina Slav wrote this article for Oilprice.com
