Oil Gains Ground On Positive Economic Data
Oil Video 13.10.20.
IMF Projects That The World Economy Will Shrink Less Than Previously Expected
Yesterday, oil declined below the $40 level as the strike in Norway ended while U.S. oil companies moved to restart production in the U.S. Gulf of Mexico after Hurricane Delta. In addition, the market was worried about Libya’s plans to increase its oil production.
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Today, the focus has shifted towards the new economic data which points to the recovery of the world economy.
The International Monetary Fund has just published its updated forecast for 2020 and 2021. According to the IMF, the world output will decline by 4.4% before growing by 5.2% in 2021.
Robust recovery in China and U.S. are the main positive factors highlighted in the new outlook. The U.S. economy is expected to shrink by 4.3% in 2020 while the previous forecast called for a decline of 8%. Meanwhile, Chinese economy is expected to grow by 1.9% in 2020 and 8.2% in 2021.
The improved forecast looks more promising for commodities, including oil. Despite the recent challenges and fears about the negative impact of the second wave of the virus, the hit to the world economy is projected to be less significant than previously expected. Not surprisingly, oil is reacting positively to this news.
China’s Trade Data Provides Additional Support To Oil
Today, China reported that its Imports grew by 13.2% year-over-year in September while Exports increased by 9.9%. The robust trade activity in China served as a significant bullish catalyst for oil since it highlighted the continuation of the recovery in the world’s second largest economy.
In combination with the IMF forecast, the recent trade data from China paints an encouraging picture for oil bulls. That said, the market still needs to see a continued decline of inventory levels before oil will be able to firmly settle above the $40 level and try to get to the test of August highs.
The previous inventory report indicated that crude inventories increased by 0.5 million barrels which was a move in the wrong direction for oil. In case inventories start to decline, oil will have more chances to gain additional upside momentum.
For a look at all of today’s economic events, check out our economic calendar.