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Oil rally continues on EU data, Syria

Goldman Sachs warned market fundamentals remain the same despite short-term rally.

By
Daniel J. Graeber
Oil price rally continues on Friday as European Union labor figures and Syrian conflict offset analyst concerns of oversupply. File Photo by Monika Graff/UPI
Oil price rally continues on Friday as European Union labor figures and Syrian conflict offset analyst concerns of oversupply. File Photo by Monika Graff/UPI | License Photo

NEW YORK, Oct. 9 (UPI) -- Strong employment data from Europe and continued unease over Syria pushed oil prices higher Friday, though underlying concerns about market persistence remain.

West Texas Intermediate, the U.S. benchmark for the prices of oil, moved above a psychological threshold in early Friday trading with a 1.5 percent gain from the previous session to $50.18 per barrel. WTI is up more than 7.5 percent for the week.

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Brent, the global benchmark, was moving upward, but slower than WTI, opening the day up seven-tenths of a percent to $53.43 per barrel. Brent since Oct. 1 is up 7.8 percent.

Crude oil prices faltered for most of the year because weak global economic momentum kept markets tilted heavily toward the supply side. Data published Friday by the European Union show there may be marginal signs of healthy recovery in the regional economy.

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Gross domestic product for the EU grew 0.4 percent during the second quarter and unemployment prospects have improved, especially for older and younger workers.

"The recent improvements observed in employment are encouraging, in particular for workers aged over 55 and long-term unemployed," EU Commissioner for Employment Marianne Thyssen said in a statement.

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Geopolitical factors, meanwhile, are adding positive risk pressure to crude oil prices. Russia last week entered the Syrian civil war on the side of President Bashar Assad. From the U.S. government's perspective, that makes the situation in the region far more dynamic.

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"They risk further international isolation," White House spokesman Josh Earnest said of Russia's role. "They risk further involvement in a sectarian conflict, sectarian civil war inside of Syria. "

Despite the short-term rally that started in earnest with Russia's military action in Syria, Goldman Sachs said in an emailed research note published late Thursday global demand for oil should remain low and the market is currently oversupplied.

"We continue to view the oil market as oversupplied and with low prices required to achieve the sufficient rebalancing in 2016," Goldman said.

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