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CALGARY – Oil prices surged more than 10 per cent as world stock markets recovered from a sharp sell-off, lifting Canadian energy shares despite lingering concerns over wobbly Chinese demand and a worldwide supply glut.
In a sharp reversal, West Texas intermediate oil on Thursday jumped 10.3 per cent after U.S. oil inventories posted a surprise drop of 5.5 million barrels and data showed stronger U.S. economic growth. WTI closed at $42.56 (U.S.) a barrel. Brent, the global benchmark, rose $4.42 to settle at $47.56 a barrel.
The rally capped a string of losses that saw U.S. oil prices touch a 2009 low of $37 a barrel this week as fears over China’s economic health sent global markets into a tailspin.
The S&P/TSX capped energy index, composed of oil producers and service company providers, climbed 6.6 per cent as investors bought into a market that analysts said was oversold.
“It looks like a deserved correction to me,” said Jim Ritterbusch, president of Chicago-based Ritterbusch & Associates, although oil prices are unlikely to stage a sustained recovery.
“Nothing’s really changed on the fundamental front,” he said. “This is all a process of following global equity markets around like a puppy dog. If the stock markets stay strong around the world, we’ll disconnect to the downside.”
Supporting prices were a revision to U.S. annual gross domestic product growth to 3.7 per cent, up from 2.3 per cent reported last month. At the same time, however, U.S. government data showed a 1.7-million-barrel increase in gasoline supplies, stoking concerns about shaky demand just as U.S. refiners head into maintenance season.
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