8.28.15: Oil Surges Most in Six Years on Faster U.S. Economic Growth

Oil jumped the most in more than six years, caught up in a relief rally that swept the globe as the U.S. economy grew more than predicted.

West Texas Intermediate futures rose 10 percent, the biggest gain since March 2009. U.S. gross domestic product grew at a 3.7 percent annualized rate in the second quarter, exceeding all estimates of economists surveyed by Bloomberg. The Standard & Poor’s 500 Index headed for its biggest two-day gain since 2009 as Chinese shares snapped a five-day losing streak.

Prices extended gains after Royal Dutch Shell Plc issued a force majeure on Bonny Light exports from Nigeria as it worked to repair two crude pipelines shut because of thefts and a leak.

Oil had slumped below $40 this week as concern over slowing demand in China fueled volatility in global markets. Prices are down about 31 percent from this year’s closing peak in June on speculation that a world supply glut will be prolonged. OPEC members are sustaining output while U.S. stockpiles remain more than 90 million barrels above the five-year seasonal average.

“We’re getting whiplash moves,” Matt Sallee, who helps manage $17.7 billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kansas, said by phone. “The shorts are skittish and whenever there’s any positive data they cover very quickly.”

WTI, Brent

West Texas Intermediate for October delivery climbed $3.96 to settle at $42.56 a barrel on the New York Mercantile Exchange. The contract touched $37.75 on Monday, the lowest level since February 2009. Prices have decreased 20 percent this year.

Brent for October settlement advanced $4.42, or 10 percent, to end the session at $47.56 a barrel on the London-based ICE Futures Europe exchange. It was the biggest gain since December 2008. The European benchmark crude closed at a $5 premium to WTI.

Crude’s gain triggered increases in shares of oil and gas producers. Chevron Corp., the second-largest U.S. energy company, surged 4.8 percent to $76.59 at 2:52 p.m.

Last quarter’s GDP growth exceeded the 2.3 percent gain the Commerce Department reported last month. The report comes as Federal Reserve policy makers debate whether growth is strong enough to withstand the first increase in the benchmark interest rate since 2006.

Bottomed Out

“We were due for a rebound after the huge selloff,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “Some good economic news and we were ready to rally. The market may have bottomed out.”

Saudi Arabia led the Organization of Petroleum Exporting Countries in its decision to maintain its crude output target unchanged at 30 million barrels a day in June to preserve market share amid rising production from the U.S. to Russia.

U.S. crude stockpiles fell 5.45 million barrels to 450.8 million last week, the Energy Information Administration reported Wednesday. Stockpiles at Cushing, Oklahoma, the nation’s biggest oil-storage hub and the delivery point for WTI futures, expanded for a second week to 57.7 million barrels.

The Bloomberg Commodity Index of 22 raw materials surged 3 percent, the most since June 2012. The index sank to the lowest since 1999 on Monday.

“The market has fallen very quickly,” Michael Hiley, head of over-the-counter energy trading at New York-based LPS Partners Inc., a futures brokerage, said by phone. “You run out of sellers, and the market goes back up. Fundamentals just don’t change that fast in commodities.”