By Geoffrey Smith
Investing.com -- Crude oil prices rose to their highest in over four months on Tuesday, as optimism over the world economic outlook and the prospects for renewed stimulus from the U.S. government at the end of the month encouraged a broad rally in risk assets.
On a day of little major news specific to the oil market, prices were pulled up by surging markets for both base and precious metals, a reflection both of reviving Chinese demand for commodities and of the unprecedented levels of liquidity created by the world’s central banks since March.
By 9:15 AM ET (1315 GMT), U.S. crude futures were up 3.0% at $42.25 a barrel, just off an intraday high of $42.28 a barrel, its highest level since the start of March.
The international benchmark Brent was up 3.1% at $44.62 a barrel.
Gasoline RBOB futures were likewise up 3.7% at their highest level in a week.
The macro backdrop was helped by the agreement – after four days of haggling – among EU leaders to back a 750 billion-euro ($860 billion) package that should help the EU economy recover from next year onwards. More immediately, it removes any lingering concerns that the euro zone could come under renewed pressure to break up.
Market participants are hoping for a similarly happy ending to what is set to be a tough few days of negotiating in Washington DC, where lawmakers and the administration need to thrash out another bill to support the economy from August onward. Many of the existing support programs expire at the end of the month.
Later in the day, the American Petroleum Institute will release its weekly estimate of U.S. crude oil stocks. Last week’s official decline of 7.5 million barrels was the biggest weekly drop this year, and another similar number would be taken as a clear reassurance as to the strength of U.S. fuel demand.
The consensus forecast is for the government’s data to show a decline of 1.95 million barrels.