U.S. crude oil stages comeback, rises nearly 1% after second-quarter growth beats expectations

U.S. crude oil staged a comeback Thursday, rising nearly 1% to top $78 per barrel after second-quarter economic growth came in stronger than expected.

Gross domestic product in the U.S. increased at a 2.8% annualized pace, beating economists’ forecasts of 2.1% growth. U.S. crude and gasoline inventories also declined last week, indicating an uptick in demand.

“The big GDP print supports the perception that the US economy is poised to make a soft landing, with inflation tailing off, and the first Fed interest rate cut in years likely to come in September, all while the economy grows at a stronger than expected,” Bob Yawger, executive director of energy futures at Mizuho Securities, told clients in a note Thursday.

Here are Thursday’s closing energy prices:

• West Texas Intermediate September contract: $78.28 per barrel, up 69 cents, or 0.89%. Year to date, U.S. crude oil has gained 9.2%.
• Brent September contract: $82.37 per barrel, up 66 cents, or 0.81%. Year to date, the global benchmark is ahead 6.9%.
• RBOB Gasoline August contract: $2.46 per gallon, up 1 cent, 0.66%. Year to date, gasoline is up 17.3%.
• Natural Gas August contract: $2.04 per thousand cubic feet, down 7 cents, or 3.59% Year to date, gas is down 18.8%.

Oil futures traded negative earlier in the session amid concerns about the health of China’s economy after the country’s central bank cut rates twice in a week. U.S. oil has lost 2.3% this week while Brent is down 0.3%.

The People’s Bank of China slashed interest rates in a unexpected move Monday, followed by a surprise cut to its medium-term facility lending rate on Thursday. China’s government also announced more stimulus to boost weak consumption.

“The semi-panicky moves are increasing concerns that Chinese energy demand may be further into the future than expected,” Yawger wrote. “Unlike the US which is poised to cut rates as higher rates tame inflation, China is cutting rates to stimulate the economy and avoid a deflationary spiral.”

China’s oil imports were down 10.7% year over year in June, while refined product imports fell 32% during the same period, according to customs data.

“Looking at the high-frequency indicators, the drop is likely driven by continued weakness in Chinese demand and some pick-up in Iranian exports,” Amarpreet Singh, energy analyst at Barclays, told clients in a Thursday note.