Crude Oil, after initial hiccups formed a sharp rally since last week. This rally was supported by positive Chinese industrial data and increase in supply concerns from Libya. The recent positive forecast for US inventories further supported the uptrend in US crude oil futures.

On Thursday last week, WTI crude oil futures for September delivery, the most actively traded contract, fell by 0.9% to close at $103.40 a barrel in the NYMEX. This was after it hit a low of $102.22 per barrel.

But, on Friday, Crude reversed its losses, as WTI crude for September delivery jumped up by 2.5% to close at 105.97 a barrel. While the Brent Crude too edged up slightly to trade at $105.60 a barrel.

Crude posted losses for a continuous fifth session on Thursday due to demand growth concerns. The US Energy Information Administration reported that US crude oil inventories dipped slightly by 1.3 million barrels, less than the expected decline of 2 million barrels. Also, the inventories for Gasoline and Heating oil posted slight increase, hinting at excess supply.

Later on the weekend, China came up with robust industrial output growth data. According to National Bureau of Statistics, Chinese industrial value-added output for July increased by 9.7% on a year-on-year basis, compared to 8.9% growth in June. This is its highest growth in the past five months, indicating at a possible growth in demand for Crude from China. The OPEC too increased its global oil demand growth to 0.8 mbd.

Starting this week on Monday, Crude prices were trading sluggish and flat as WTI crude ticked up by $0.10 to $106.07 a barrel. On Tuesday, the same WTI crude for September delivery briskly climbed up by $1.09 to $107.20 per barrel in NYMEX. Brent Crude for the same contract edged up by 66 cents to $109.63 a barrel in ICE Futures.

 On Wednesday, the Brent Crude, the international benchmark for Crude oil, further advanced by 0.8% to $109.82 a barrel. The WTI crude for September delivery too appreciated by 72 cents to settle up at $106.83 a barrel.

Crude rose up this week even though some of economic indicators sent mixed signals among the investors. Monday saw a lukewarm trade in Crude as Chinese inflation data at 2.7% against the 2.8% predictions was not promising enough. But, Euro zone data like improvement in German manufacturing sector and an increase in Switzerland’s retail sales, more than offset the negative sentiments. Dollar’s slight gain in strength too was a reason for the static trade.

Later on Tuesday, Crude got the much need trigger to budge up. The EIA reported that US Crude oil stockpiles dropped by 30.8 million barrels from June 21 to Aug 2. This was due to US refineries operating at more than 90% capacity, signaling at demand growth. Moreover, the security guards strike in Libya closed down several oil plants. This caused severe supply concerns in the MENA region as the protests spread, with Iraq too reducing production for maintenance.

Additionally, the US retail sales data is forecasted to increase by 0.3% for July according to a Bloomberg survey. Also, according to the ZEW Center for European Economic Research, German investor and analyst expectations increased to 42 in August, beating expectations of 39.9. This offset any pessimism in the Crude oil market and increased the demand outlook.

However, the positive US data strengthened speculations for Fed monetary tapering, which will boost US dollar and bring down Crude prices. Moreover, the International Energy Agency has reduced its global oil demand forecast for the 2014 in the backdrop of weak economic growth forecast from the IMF.

So, Crude oil will possibly continue its rally on further economic data increasing its demand growth. But, the price rise might be capped by some weak global economic cues.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.