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Home / Futures Blog / Crude oil futures rise to highest levels since July

Crude oil futures rise to highest levels since July

October 27, 2011 by Daniels Trading

Crude oil futures shot to their highest value in nearly 90 days amid economic data indicating the strongest U.S. economic growth in 12 months and progress with the sovereign debt crisis in the euro zone, according to published reports.

The U.S. Department of Commerce announced the nation's gross domestic product gained 2.5 percent during the three-month period of the third quarter, which was not as high as projections indicated yet higher than figures from the two previous quarters of the year. The U.S. is the globe's top consumer of crude oil, using more than 19 million barrels per day last year, according to data cited by the BP Statistical Review.

To alleviate pressure on beleaguered Greece, which is awaiting its second tranche of emergency international aid since June 2010, leaders in the euro zone convinced bondholders to accede to 50 percent losses on debt from the Aegean nation. The European Financial Stability Facility, an emergency fund to assist troubled nations, was augmented to 1 trillion euros, roughly equal to $1.4 trillion.

"These two reports in concert are likely to engender significant optimism," president Jason Schenker with energy consultancy Prestige Economics in Texas told Bloomberg. "The most important thing is that some confidence in the economy is restored."

Second quarter gross domestic product figures in the U.S. were 1.3 percent while the first quarter's gross domestic product was only 0.4 percent. The Department of Commerce indicated household purchases, the largest segment of the U.S. economy, gained 2.4 percent, exceeding the 1.9 percent median projection cited by a survey conducted by Bloomberg.

At 4:32 p.m. on Thursday, crude oil futures gained 2.84 percent, a $3.09 gain to $112 per barrel.

Euro zone leaders boosted the size of the EFSF in order to isolate the sovereign debt scourge that has infected euro zone nations in addition to Greece. Ireland already was granted a bailout and Spain, Italy and Portugal are believed to be immersed in high levels of debt.

The increased size of the EFSF merged with the uplifting economic data from the Department of Commerce prompted one analyst to laud the ripe conditions for crude oil futures to gain.

"The bullish stars are in line," Matt Smith with Summit Energy told Dow Jones Newswires, noting an additional plus is that U.S. oil inventories are hovering around the lowest levels in five years.

Earlier this week, crude oil prices touched their top amount since the second day of August.

Crude prices will hover around these levels during what Smith called "a few days of euphoria," though a weak U.S. demand for the energy commodity might prove to be of concern for limiting gains in price.

He also noted that shipments to the U.S. are likely to gain, but in the meantime market circumstances are fertile, the analyst said.

"Stocks are going to fill up as imports are starting to rise again," Smith told the publication. "From a bigger picture view, the market is pretty well supplied for now and demand is tepid to put it mildly."

Reuters reports Thursday was driven by the strong performance of futures for gasoline, which gained at least 4 percent to pace commodities' energy complex.

An analyst with Commerzbank noted the contrast with Wednesday's gasoline futures performance, which was bearish.

"There's a risk-on mood in the market, despite yesterday's rather bearish (U.S.) inventory report," Carsten Fritsch told Reuters.

Crude oil futures also dropped in value on Wednesday, falling 3 percent due to an increase in U.S. inventories of 4.7 million barrels, which was more than anticipated. Another reason for Wednesday poor performance is skepticism about what euro zone officials achieve in Brussels.

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

Filed Under: Archived News

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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