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By Barani Krishnan
Investing.com - The good news for the week isn’t over for the oil bull, and the market for crude is reflecting that.
Thursday’s U.S. GDP reading for the first quarter came within expectations, adding octane to an oil rally that has boosted crude prices by nearly $3 per barrel or 5% from Monday’s close.
U.S. Gross Domestic Product likely expanded by 6.4% in the first quarter, the Commerce Department said in the first of three quarterly readings for the economy. The market had expected a Q1 growth of 6.1%, according to Investing.com.
A weekly reading on U.S. employment benefits also showed a 2% decline in filings for last week after a 7% drop the previous week and a 25% plunge the week prior.
“The economy has been strengthening, helped by fiscal stimulus as well as an easing of COVID restrictions and fears, albeit not quite as much as implied,” TD Securities said in a note.
The Commerce Department noted that the economy rebounded from a 4.3% growth in the previous quarter and especially after a surge in consumer spending helped by $1,400 Covid-relief checks sent out by the Treasury last month.
One eye-catching thing consumers splurged on: new trucks that added to the narrative of steadying demand for fuel.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled up $1.15, or 1.8%, at $65.01 per barrel. WTI closed at $61.91 on Monday before beginning a three-day run-up.
London-traded Brent, the global benchmark for crude, settled up $1.27, or 1.9%, at $68.05. Brent finished at $65.65 on Monday.
This week’s oil rally began in earnest after Wednesday’s update on the U.S. petroleum supply-demand situation by the Energy Information Administration, which implied supplies were tightening.
The EIA said crude inventories in the United States only rose by 90,000 barrels last week, compared with analysts' expectations for a build of 659,000 barrels
Distillate stockpiles, which include diesel and heating oil, fell 3.342 million barrels for the week ended April 23, against expectations for a draw of 648,000 barrels.
Gasoline inventories rose by 92,000 barrels last week, compared with expectations for a build of 508,000 barrels.
Wall Street bank Goldman Sachs (NYSE:GS) also lit a flame under oil by forecasting Brent prices as high as $80 a barrel by the end October, and WTI at $77.
Contrasting with this week’s bullish theme was the story of the continued Covid devastation in India, the world’s third-largest buyer of India.
Rystad Energy warned on Wednesday that India’s crisis could slash an extra 575,000 barrels per day of oil liquids demand in April and 915,000 bpd in May 2021, disturbing the almost-balanced global oil market and building a sizable glut.
A joint-technical committee meeting of oil producers from the OPEC+ cartel just concluded on Monday it might be able to clear by the end of the second quarter a year-long glut in oil triggered by the pandemic.
OPEC+, which held back at least 7 million barrels of daily supply from the market since April 2020, will be pumping more oil from next month. It plans to add 350,000 barrels per day in May and June, and a further 400,000 barrels daily in July.