'Solid, just solid': U.S. GDP rebound eases recession fears - Energy News, Top Headlines, Commentaries, Features & Events

Estimates show gross domestic product expanded at a 2.6 per cent annualized rate

Bloomberg News

Oct 27, 2022

U.S. GDP in the third quarter performed a U-turn after growth contracted in the first two quarters of 2022. PHOTO BY RICHA NAIDU /Reuters

Oil leaped after the U.S. reported an economic rebound last quarter, easing recession fears and bolstering the demand outlook.

West Texas Intermediate futures traded as high as US$89.60 after U.S. government estimates showed gross domestic product growth at a 2.6 per cent annualized rate. The uptick brightens the demand outlook for crude as it eases recession concerns prompted by falling GDP for the first two quarters of this year.

“This GDP number is solid, just solid,” said John Kilduff, founding partner at Again Capital. “A lot of folks were trying to make a recession call and it’s obvious that we’re not in it.”

Adding to the bullish crude outlook, total U.S. petroleum exports hit a record 11.4 million barrels a day last week, according to a weekly government report Wednesday. The surge came as domestic fuel inventories are at historic seasonal lows.

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Crude racked up four consecutive monthly losses on concerns about a global slowdown and tighter monetary policy, and has remained choppy in October as markets tried to weigh the demand outlook against expected supply tightness following the announcement of a major output cut by the Organization of Petroleum Exporting Countries.

Investors have also been gauging the impact of upcoming European Union sanctions on Russia.

The EU and U.S. have proposed capping prices on Russian oil, but U.S. officials have been forced to scale back the price-cap plan ahead of its potential implementation this quarter, according to people familiar with the matter. Instead of strangling the Kremlin’s oil revenues by imposing a strict lid on prices, the U.S. and EU are now likely to settle for a more loosely policed limit that’s imposed at a higher price than once envisioned.