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Oil rallies, though low growth persists

European economy shows little growth in August.

By Daniel J. Graeber
Oil rallies, though low growth persists
Crude oil prices spike after White House Press Secretary Josh Earnest signals most U.S. oil will stay at home. Photo by Kevin Dietsch/UPI | License Photo

NEW YORK, Sept. 16 (UPI) -- Crude oil prices opened strong in Wednesday trading after signs of dwindling stockpiles and indication the White House would keep U.S. oil behind closed doors.

West Texas Intermediate, the U.S. benchmark price for crude oil, gained 3 percent to $45.59 per barrel at the opening of trading in New York. Brent gained 3.1 percent to $49.29 per barrel.

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The U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries in separate reports said North American crude oil production would likely drop under pressure of a weak oil economy.

Crude oil prices are down more than 50 percent from last year, despite Wednesday's early session rally. Lower prices means less spending on production, though global demand is also down because of weak economic growth outside the United States.

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Shale oil industry supporters have called for an end to a ban on crude oil exports, arguing that it would translate to a form of economic stimulus while increasing U.S. leverage overseas. White House spokesman John Earnest said there's little support for legislative action, however.

"This is a policy decision that is made over at the Commerce Department," he said.

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Prices were supported further by data from the American Petroleum Institute showing a 3.1 million barrel decline in crude oil inventories for the week ending Sept. 11. A more formal release on inventories will be published late Wednesday by the EIA.

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Wednesday's rally may be short-lived against the background of anemic global economic growth. Chinese economic growth is slowing despite government efforts to slow the decline. Ratings agency Standard and Poor's, meanwhile, lowered its credit outlook for Japan, which has struggled to emerge from economic recession.

In Europe, Eurostat, the European Union's statistics office, said employment was flat and inflation was low.

"European Union annual inflation was 0.0 percent in August 2015, down from 0.2 percent in July," it said. "A year earlier, the rate was 0.5 percent."

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