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Rally in oil prices stalls despite global tensions

A report from the OECD shows general economic improvements, though Germany reportedly slowing down in the second quarter.

By Daniel J. Graeber
Rally in oil prices stalls despite global tensions
Oil prices mixed early Friday as a strong hurricane-triggered rally runs up against a ceiling. File Photo by Monika Graff/UPI | License Photo

Sept. 15 (UPI) -- Indications of positive economic momentum for the G20, global tensions and terrorism left oil prices near the yearly high, despite volatility early Friday.

More than 20 people were hospitalized after an explosion shook a train leaving the Parsons Green station in southwest London during the morning rush hour. London's Metropolitan Police said there were treating it as a terrorist-related incident. That came hours after North Korea launched a missile over Japanese territory.

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Geopolitical tensions and national security issues tend to create a risk premium for crude oil prices. Some of the momentum was supported by a report from the Organization of Economic Cooperation and Development that showed growth in the Group of 20 industrialized economies grew 0.9 percent in the second quarter, a slight uptick from first quarter 2017.

The report was mixed, however, with Turkey and China showing the highest rates of acceleration, countered by emerging weakness in Germany, one of the stronger economies in the European Union. The U.S. Commerce Department, meanwhile, reported a 0.2 percent decline in retail sales in August, the largest monthly decline in six months

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Crude oil prices were mixed minutes before the start of trading in New York. The price for West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.06 percent to $49.86 per barrel. Brent, the global benchmark, was up 0.3 percent to $55.63 per barrel.

Markets may react later in the day when drilling services company Baker Hughes releases its weekly tally for activity in the exploration and production side of the energy sector. Reported as rig counts, an increase would signal companies are willing to ramp up activity, which would drag oil prices lower because of possible supply-side strains further down the road.

An emailed report from London oil broker PVM said there were "pockets of unease" still entrenched in the market because of lingering supply-side strains. Crude oil price may be range-bound between $50 and $60 per barrel, meanwhile, and the report said the upside potential "is still in short supply."

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