Oil Surges as Strong Economic Data from China Proves Analytical Outlooks Wrong

But some experts are determined to keep sentiment negative: File Image/Pixabay

The seesaw pattern of crude trading as exemplified by Wednesday's unexpected 4 percent price rise proved, if nothing else, that traders and analysts can't make up their minds about the true state of global economics, especially as it pertains to China.

Brent rose $2.44, or 4.2 percent, to settle at $60.70 per barrel, while West Texas Intermediate gained $2.32, or 4.3 percent, to $56.26 - as a result of a private survey showing that activity in China's services sector expanded at the fastest pace in three months in August as new orders rose, prompting the biggest increase in hiring in more than a year.

The past three crude trading sessions were motivated by the fear that the U.S./China trade war didn't just have the potential for ruining regional and international economic performance, but that the damaging effects were already well underway; in fact, for the past month many analysts have warned, with speculation and not hard facts to support them, that another recession could be imminent.

Wednesday's gains were also supported by the expectations of another U.S. stockpile decline, according to a Reuters poll; if this comes to pass, it will be the third straight week of declines reported by the American Petroleum Institute - and another indication that crude demand is healthy, contrary to recent analytical arguments.

Still, the analytical community remained as keen as ever to remain pessimistic about near-term outcomes: "Oil prices...remain focused on the trade war and the longer we don't see a date scheduled for a face-to-face meeting between Chinese and U.S. officials, the greater the odds we could see a retest of the summer lows," stated Edward Moya, senior market analyst at OANDA, in a report.

Ole Hansen, commodity strategist for Saxo Bank, remarked, "Crude oil remains troubled by reports that production from OPEC, Russia and the U.S. all rose last month; this [comes] at a time when the strength of demand growth, due to trade war pessimism, has increasingly been called into question."

Dovetailing Hansen's observation was news from Russia on Wednesday that the former Soviet Union's oil output for September will be lower than it was in August.

Another sign that geopolitical tensions may be easing - if only for the time-being - was Iran on Wednesday deciding to free seven crew members of the detained British-flagged tanker Stena Impero, which was seized two weeks after Britain detained an Iranian tanker off the territory of Gibraltar.