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James Hyerczyk
Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading better on Friday after gapping yesterday’s close. The markets are also in a position to close higher for the first week in three. An easing of concerns over a U.S. recession is helping to boost prices early today.

At 08:09 GMT, October WTI crude oil is trading $55.15, up $0.73 or +1.38% and December Brent crude oil is at $57.90, up $0.56 or +0.98%.

Early in the week, the markets were underpinned by optimism over potential production cuts by OPEC. Today, it’s better than expected U.S. retail sales data supporting prices. On Thursday, the U.S. reported that retail sales rose 0.7% in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, according to data that came a day after the 2-year/20-year U.S. Treasury yield inverted for the first time since June 2007 prompting a sell-off in stocks and crude oil.

In other potentially supportive news, a Saudi official on August 8 indicated more steps may be coming, saying “Saudi Arabia is committed to do whatever it takes to keep the market balanced next year.”

Helping to cap gains this week has been concerns over lower demand due to a weakening global economy. China reported a surprise drop in industrial output growth to a more than 17-year low. Additionally, a drop in exports sent Germany’s economy in reverse in the second quarter.

Furthermore, for a second consecutive week, U.S. crude oil inventories unexpectedly rose according to the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA).

Daily Forecast

Today’s key reports include U.S. Building Permits, Housing Starts and the Preliminary University of Michigan Consumer Sentiment report. These reports could indirectly affect crude oil prices. If they come in better-than-expected then this will ease concerns about a recession, which could provide further support for prices.

However, what bullish traders are really hoping for is a rise in U.S. Treasury yields and renewed strength in U.S. equity markets. This would send an even stronger signal that talk of a U.S. recession is a little premature.

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