Oil up nearly 1 percent as stimulus hopes ease growth
concerns
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[January 23, 2019]
By Noah Browning
LONDON (Reuters) - Oil prices rose almost 1
percent on Wednesday on hopes that Japan and China would take fiscal
stimulus measures to stem an economic slowdown which has weighed on
financial markets.
International Brent crude oil futures were at $62.10 per barrel at 1040
GMT, up 60 cents or 0.98 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $53.48 per
barrel, up 47 cents or 0.89 percent.
Oil prices fell by 2 percent on Tuesday as financial markets reeled from
concerns about a global economic slowdown and the heavy losses spooked
investors into safe-haven assets such as government bonds or gold.
A litany of poor economic data worldwide - including tumbling U.S. home
sales, slumping Canadian factory sales and wholesale trade along with
Japanese import and export data which fell short of expectations -
sapped market confidence.
A widespread economic slowdown is expected to dent growth in demand for
fuel, weighing on energy prices.
But some optimism emerged as China and Japan said they would use fiscal
spending to boost growth.
Chinese finance ministry officials said on Wednesday the government
would step up fiscal spending this year to support its economy, which
last year registered its lowest growth rate since 1990.
The Bank of Japan said it would keep its ultra-easy monetary settings
which have been running since 2013.
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Crude oil storage tanks are seen from above at the Cushing oil hub
in Oklahoma, U.S., March 24, 2016. REUTERS/Nick Oxford/File Photo
Steen Jakobsen, chief economist at Denmark's Saxo Bank, said "the global economy
is suffering", but added that China's government would "do all it can for
stability".
Should a U.S.-China trade deal to resolve the two superpowers' trade tensions be
reached promptly, Jakobsen said, "we will see powerful support for the Chinese
economy".
Providing oil prices with support in 2019 have been production cuts led by the
Organization of the Petroleum Exporting Countries (OPEC), aimed at reining in an
emerging supply overhang.
Whether OPEC's efforts will be successful will also depend on the development of
oil production in the United States, where crude output jumped by 2 million bpd
in 2018 to an unprecedented 11.9 million bpd.
While the U.S. Energy Information Administration (EIA) said on Tuesday that it
expected shale output to rise further, it said that production growth would slow
in the coming years.
(Graphic: U.S. oil production growth - https://tmsnrt.rs/2AZSnDc)
(Reporting by Noah Browning; Additional reporting by Henning Gloystein; Editing
by Joseph Radford/Christian Schmollinger and Emelia Sithole-Matarise)
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