Following weeks of volatility, a rally in oil prices should provide investors with some respite. After two big pipelines in Nigeria went down and plenty of good news from the US economy, oil prices rallied by more than they have in over six years. Brent crude jumped by $4.42 to $47.56, the largest jump since late 2008, while the US crude price benchmark, the West Texas Intermediate, reached $42.56 after a price increase of $3.96 – the highest since 2009.
Stronger US economic growth figures and the surge in oil prices suggest the Federal Reserve may raise interest rates in September
The cost of oil hit record lows across 2014 and 2015, with prices seeing their largest losing streak since 1986. Earlier in August, prices hit a new six year low with Brent and US crude futures falling below $45 and $40. According to BMI Research, the recent rise is just the start, some reports suggest.
The price rise is due to both the downing of a major pipeline, leading to the prospect of restricted supply, as well as positive economic news. US economic growth figures have been revised upwards. Greater corporate investment has led to the annualised rate of growth to be revised from 2.3 percent to 3.7 percent.
Stronger US economic growth figures and the surge in oil prices suggest the Federal Reserve may raise interest rates in September, after global economic turmoil cast doubts on the expected hike. Senior officials from the Fed are currently meeting in Jackson Hole, Wyoming to discuss the issue.
Both the rally in oil and revised US growth figures should bring calm and recovery to markets, after a number of bearish days. “A healthy upwards revision to US GDP should act as a much needed soothing balm for investors after the turbulence of this week,” Nancy Curtin, Chief Investment Officer at Close Brothers Asset Management, told the BBC.
