Oil Spikes Above $50, Global Economic Woes Pare Gains
Brent crude spiked above $50 on Wednesday, boosted by the response to a bullish report on consumer sentiment, before paring gains on a strengthening dollar and broader global economic woes.
The University of Michigan released a report showing consumer sentiment at its highest level in more than a decade, thanks to low gasoline prices and job gains.
While the report was definitely bullish, it was not enough to balance out the rest of the world's diminishing demand, said energy economist James Williams at WTRG Economics.
"It doesn't fix anything in Europe," he said. "The world isn't getting better."
In China, the second-largest oil consumer, there were signs of weakness as the central bank announced new support measures after data showed a drop in bank lending and foreign investment growth falling to a two-year low.
The U.S. dollar index rose 0.54 percent, which may have caused crude to fall back to early-morning levels, Williams said.
Brent crude futures for March rose 84 cents to $49.11 by 12:00 p.m. EST (1500 GMT). WTI was trading up $1.24 at $47.49 a barrel.
Bob Yawger, director of energy futures at Mizuho Securities USA, partly attributed the gains to rising RBOB gasoline futures, which were up 2 percent. "You see gas leading the crude oil to the upside," he said.
The market was also responding positively to a report from the International Energy Agency (IEA), which said there were signs lower prices had begun to curb production in some areas, including North America.
"How low the market's floor will be is anybody's guess. But the sell-off is having an impact," the IEA said in its monthly report on Friday. "A price recovery - barring any major disruption - may not be imminent, but signs are mounting that the tide will turn.
"A rebalancing may begin to occur in the second half of the year," the agency added.
Analysts said Brent, which traded steadily above $48 before the IEA's announcement, also had strong technical support.
(By Samantha Sunne; Additional reporting by Henning Gloystein in Singapore and Christopher Johnson in London; Editing by Jessica Resnick-Ault, Dale Hudson and Alan Crosby)
