News Column

Crude Oil Surges To End Above USD97 On Ukraine Tensions

August 15, 2014

WASHINGTON (Alliance News) - US crude oil rebounded to end sharply higher Friday, on reports of escalating tensions between Russia and Ukraine over the ongoing conflict in eastern Ukraine. The uptick comes after oil prices plummeted two % to a seven-month low yesterday on demand growth concerns.

Some upbeat economic data from the US also boosted oil prices with industrial production increasing more than expected in July though consumer sentiment deteriorated more than anticipated.

Oil prices shot up on news that Ukraine armed forces have attacked and destroyed part of a Russian military column that entered the country overnight. The news ignited fears the situation could escalate and disrupt crude shipments out of Russia.

A convoy of Russian vehicles carrying aid for rebel-held areas in eastern Ukraine is waiting for permission of the Ukrainian government to enter the country. Kiev fears that the convoy could be a prelude to a possible Russian military intervention.

Recent data has shown an upswing in crude oil supplies amid signs that global demand for energy products may wane. Economic growth in Germany and France stopped in the second quarter, and the pace of China's growth is expected to slow.

Libya's exports are getting back online with the re-opening of its largest port, Es Sider, which was closed for nearly a year.

Light Sweet Crude Oil futures for September delivery, the most actively traded contract, soared USD1.77 or 1.8% to close at USD97.35 a barrel on the New York Mercantile Exchange Friday.

Crude prices for September delivery scaled a high of USD97.41 a barrel intraday and a low of USD95.32.

On Thursday, crude oil futures dropped 2% to its lowest since January, on demand growth concerns after some weak economic data from the US and on the unexpected increase in US oil stockpiles last week.

The dollar index, which tracks the US unit against six major currencies, traded at 81.45 on Friday, down from its previous close of 81.62 late Thursday in North American trade. The dollar scaled a high of 81.62 intraday and a low of 81.38.

The euro traded higher against the dollar at USD1.3393 on Friday, as compared to its previous close of USD1.3365 late Thursday in North American trade. The euro scaled a high of USD1.3411 intraday and a low of USD1.3359.

In economic news from the US, a Federal Reserve report showed industrial production to have risen by 0.4% in July, matching the upwardly revised increase reported for June. Economists expected production to rise by 0.3% compared to the 0.2% uptick originally reported for the previous month.

The bigger than expected increase in production was largely due to the jump in manufacturing output, which surged 1.0% in July after climbing by an upwardly revised 0.3% in June.

A preliminary report from Thomson Reuters and the University of Michigan on Friday showed US consumer sentiment index for August dropped to 79.2 compared to the final July reading of 81.8. Economists expected the consumer sentiment index to inch up to a reading of 82.3.

The New York Fed said its general business conditions index dropped to 14.7 in August from 25.6 in July, although a positive reading continues to indicate an increase in regional manufacturing activity. The index has been expected to dip to a reading of 20.0. The bigger than expected pullback by the general business conditions index after having reached a four-year high in the previous month.

The US Labor Department said its producer price index for final demand inched up by 0.1% in July after climbing 0.4% in June. The modest increase was in line with economists' estimates.

Higher food prices contributed to the modest increase by the producer price index, as food prices rose by 0.4% in July after falling by 0.2% in each of the two previous months.

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Source: Alliance News

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