Oil runs best in 3 years as dollar, stocks tread water
Signs of a stabilisation in China’s giant economy and a soggy dollar helped oil markets cement their best run for more than three years on Friday, though stocks weren’t buoyed much after spending most of the week treading water. There was a late flurry of activity, mostly from emerging markets.
China’s data showing exports rebounded nicely last month helped offset weaker imports and reports in Europe of another cut to Germany’s growth forecasts, while Turkey’s lira was back on the ropes amid worries about its trajectory.
The euro however gained despite the German growth concerns, and it wasn’t just going rogue, with dealers gearing up for demand from Japan as Mitsubishi UFJ Financial closed in on its multi-billion euro buy of DZ Bank’s aviation finance business.
Europe’s bourses slowly shook off another groggy start, as had Wall Street futures which were limbering up for earnings from bulge-bracket banks JPMorgan and Wells Fargo. The Chinese data was a little mixed but the money supply numbers were a positive impulse overall, said TD Securities Senior Global Strategist James Rossiter.
It was oil though that provided the big milestones. Brent was at $71.4 a barrel, having broken back through the $70 threshold this week, and U.S. WTI was heading for a sixth straight week of gains for the first time since early 2016.
Driving the rise has been involuntary supply cuts from Venezuela, Libya and Iran, which have supported perceptions of a tightening market already underpinned by a production reduction deal from OPEC and its allies.
We expect oil price to eventually move higher in Q2 as OPEC+ potentially runs the risk of over-tightening the market by maintaining its current course of action, Harry Tchilinguirian, strategist at BNP Paribas, told the Reuters Global Oil forum.