Rally in crude oil prices fades after report from the OECD finds negative pressure building in most major economies. Brent moved briefly above $40 per barrel, before falling in the opening rounds of trading Thursday. File photo by Monika Graff/UPI |
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NEW YORK, April 7 (UPI) -- Reports of a minor slowdown in major economies pushed crude oil prices lower Thursday, one day after supply-side indications sparked a major rally.
Crude oil prices moved up roughly 5 percent in Wednesday trading after U.S. data showed a drawdown in domestic oil stockpiles. Inventories had been building as demand levels were unable to compensate for higher levels of production from shale, which has proven more resilient to the drop in crude oil prices than expected.
Wednesday's rally was sparked in part by modest growth in the Chinese economy. On Thursday, the Organization for Economic Cooperation and Development reported real gross domestic product growth across the 34 member states declined 0.4 percent in the fourth quarter, which it said was a reflection of a decline in private-sector consumption.
"The contribution of private consumption to overall GDP growth was lower in nearly all major economies in the fourth quarter of 2015 compared to the previous quarter, but remained the main driver of growth in Italy, the United Kingdom and the United States," the OECD said in its report.
Brent crude oil prices pulled back from an overnight rally to drop 1.2 percent in early Thursday trading in New York to $39.34 per barrel. West Texas Intermediate, the U.S. benchmark price for crude oil, lost 0.5 percent to move toward $37.54 per barrel.
U.S. Federal Reserve Chair Janet Yellen said last week crude oil prices had been less-than-favorable for broad-based growth, though labor and housing gains were supporting momentum for the United States. In European markets, employment and industrial activity had shown signs of recovery, though last month the European Central Bank nevertheless cut its inflation and growth expectations.
Recent Kuwaiti support for proposal for Russia and members of the Organization of Petroleum Exporting Countries to keep production at January levels helped lift crude oil prices higher this week. A research note from Goldman Sachs, cited by Bloomberg News early Thursday, said its analysts have "been less willing" to believe in the reality of a production cut. Instead, its report said it expected OPEC production to increase by about 600,000 barrels per day this year.
