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Oil rallies on strong Chinese, U.S. data

Chinese stock market rallies, while U.S. GDP grows faster than expected.

By Daniel J. Graeber
Crude oil prices rally on strong day on Chinese stock market and upward momentum for U.S. GDP. Photo by John Angelillo/UPI
Crude oil prices rally on strong day on Chinese stock market and upward momentum for U.S. GDP. Photo by John Angelillo/UPI | License Photo

NEW YORK, Aug. 27 (UPI) -- Strong economic indicators in the United States and China pushed crude oil prices into the black, with key indices increasing Thursday by more than 3 percent.

Brent crude oil prices rallied in early Thursday trading, moving more than 3.5 percent above the previous close to $44.71 per barrel. The U.S. benchmark for crude oil prices, West Texas Intermediate, moved more or less in parallel to $39.97 per barrel early in the trading day.

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Crude oil prices plummeted early this week after a dramatic sell off on the Shanghai Composite Index. Beijing has injected cash into the markets, cut key interest rates and devalued its currency in recent weeks in an effort to slow the downward momentum.

China's economy is slowing, though still expected to grow by more than 6 percent for gross domestic product. The Shanghai Composite closed up more than 5 percent for Thursday.

Commentary published Thursday by the official Xinhua News Agency described early week market stumbles as a short-term over-reaction.

"Recent sell-offs in China's stock market dominated by irrational retail investors were just out of panic," it said. "Economic fundamentals in the country are stable, with glimmering signs of improvement."

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Expected demand from China and developed Asian economies were in part behind the justification given by the Organization of Petroleum Exporting Countries to keep production stable despite the steady decline in crude oil prices.

Brent started August at $49.57, while WTI traded for $45.17 per barrel. An increase in crude oil supplies in what's seen as a weak global economy, where demand is down, have pushed energy markets lower.

Thursday's oil price rally was in part fueled by data from the U.S. Commerce Department showing the U.S. economy expanded faster than previous estimates. Real gross domestic product increased at an annualized rate of 3.7 percent during the second quarter, up from the initial estimate of 2.3 percent.

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