Oil prices to rally on higher demand


During the last week, crude oil price for December delivery rallied on positive economic news to close above $90 for the first time since July.

Oil advanced 3.27% on Thursday helped by positive data about the US economy, registering its fastest growth in the year and easing fears of a possible recession. However, the rise was halted with the third largest oil consumer, Japan, posting a decline in its industrial output on Friday. Data released showed factory production fell 4.0% in September, almost twice as much as predicted by analysts. As a result, crude for December delivery was down nearly 1.0% and closed near the $93 mark on Friday.

An unexpected increase in crude oil inventories reported by the Energy Information Administration also moderated the increase. The price will be expected to float at this level with markets being optimistic after the EU agreement.

However, it remains to be seen how the EU plan actually works out and the role emerging markets will play to stabilize the euro zone and the impact it has on its oil consumption.

Aside from being optimistic over the EU agreement, investors also expect oil prices to rally on demand from China. Furthermore, tracking data compiled by Bloomberg showed crude oil shipments bound for China surged 9.0% this week, as the second largest oil consumer takes measures to boost domestic demand to reduce its dependence on exports to US and Europe in order to fuel growth.[mpoverlay][/mpoverlay]


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