Oil Prices Jump as US Records 6.5% GDP Growth
Oil prices jump Thursday as the United States (US) records 6.5% gross domestic product (GDP) in the second quarter of 2021. Investors hope for increased demand outlook was strengthened as US crude oil stocks declined to 18-month lows.
International benchmark Brent crude was trading at $74.43 per barrel, increased by 0.76% after closing Tuesday at $73.87 a barrel.
American benchmark West Texas Intermediate (WTI) traded at $73.03 a barrel at the same time for a 0.88% rise after ending the previous session at $72.39 per barrel.
Oil prices found support after the US Energy Information Administration (EIA) announced Wednesday that the country’s crude oil inventories fell by 4.1 million barrels, or 0.9%, during the week ending June 23, signalling improving demand.
With last week’s decline, crude stocks in the country have seen the lowest level since January 2020.
Adding to the upbeat sentiment in oil prices, the Fed signalled indicators of economic activity in its July meeting on Tuesday “with progress on vaccinations and strong policy support.”
The Fed said sectors most adversely affected by the coronavirus pandemic showed improvement but have not fully recovered yet. Jerome Powell, Fed Chairman later said in a news conference that inflation had increased notably in the US and would likely remain elevated in the coming months before moderating.
Meanwhile, coronavirus pandemic developments continue to impact oil prices as countries worldwide battle the more contagious and deadlier Delta variant.
According to the real-time statistics website, Worldometer, Thailand registered a record number of daily coronavirus fatalities on Thursday with 165 deaths over the past day, taking the country’s death toll to 4,562. France will implement a controversial health pass measure in social places starting the second week of August, officials said Wednesday.
The new law on the health crisis, including compulsory vaccination for health care professionals and isolation for coronavirus patients along with an extension of the health pass for entry into public and social places like restaurants, cafes and long-distance transport will take effect from Aug. 9, government spokesman Gabriel Attal said at a news conference.
Meanwhile, Kenya’s Health Minister Mutahi Kagwe warned Wednesday that the nation is at the beginning of a fourth coronavirus wave, citing increased infections.
The US economy grew at a 6.5% annual rate in the second quarter following a downward revised 6.3% gain in the previous quarter, below expectations for an 8.4% jump.
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Benchmark revisions back to 1999 were included in the data but did not significantly alter the path of GDP movements over that period. The real dollar level of GDP is now above the pre-pandemic level in the fourth quarter of 2019.
Consumption rose by 11.8% in the second quarter, moderately faster than the 11.4% increase in the previous quarter.
The pace of goods consumption slowed, but spending on services accelerated, a sign that the recovery from the pandemic is continuing in the hardest-hit sectors.
Offsetting the consumption jump was a decline in residential fixed investment spending, slower nonresidential fixed investment growth, and a reversal in government spending after a first-quarter boost from the stimulus payments.
In addition, business inventories fell at a faster rate than in the first quarter as producers were unable to keep up with the brisk pace of demand, and the net export gap widened.
After supply bottlenecks dissipate, some of these issues should be resolved.
Inflation accelerated in the second quarter. The overall GDP price index rose by 6%, while the PCE price index increased by 6.4% and the core PCE price index was up 6.1%, all well above their first-quarter rates.
On a year-over-year basis, PCE prices were up 3.8% and core up 3.4%, well above the Federal Reserve’s 2% target. The monthly readings for June will be released on Friday.
Released at the same time, initial jobless claims fell by only 24,000 to 400,000 in the week ended July 24 after rising by 56,000 in the previous week due to seasonal adjustment issues related to July auto retooling shutdowns.
The four-week moving average rose by 8,000 in the week ended July 24, a second straight gain in an otherwise flat-to-downward trajectory seen in recent months. After the seasonal adjustment disruptions of July leave the calculation, the average should settle lower.
Insured jobless claims rose by 7,000 to 3.269 million in the employment survey week ended July 17, compared with the 3.412 million levels in the survey week ended June 12.
Other data released on Thursday:
The National Association of Realtors’ monthly pending home sales index fell by 1.9% in June, below expectations for no change after an 8.3% jump in the previous month.
Pending sales were also down 1.9% from a year earlier. The NAR attributed the recent declines to the high level of prices that is discouraging some prospective buyers. The NAR’s existing home sales data for June is due on Aug. 23.
Weekly natural gas stocks by 36 billion cubic feet to 2.714 trillion cubic feet in the week ended July 23, down 16.2% from the comparable week a year earlier.
Oil Prices Jump as US Records 6.5% GDP Growth
