Since crude oil price dropped to its 12 years low on Wednesday, it started rebound Thursday, even as U.S. government data showed a further increase in oil supplies. U.S. stock market jumped up in late Thursday morning trading, surged by telecommunications, energy and consumer discretionary shares.
"The underlying focus is still on oil because people are looking at the transmission mechanism to the real economy of lower oil prices," said Gennadiy Goldberg, interest rate strategist, at TD Securities in New York. "Lower oil prices are maybe great for the consumer, but not unilaterally good for the U.S economy."
According to the U.S. Energy Information Administration Thursday announcement, crude oil inventory increased by 3.98 million barrels in the latest week which is much more than expectation of 2.3 million barrels. Sweet crude for March delivery recently increased 2.4% to $29.04 per barrel on the New York Mercantile Exchange.
U.S. crude oil inventory are already near highest levels in decades and their growth adds to the oversupply of crude oil around the world, which has battered the market for nearly two years.
In addition, concerns about China’s economy, the world’s second-biggest crude oil consumer, have increase the oversupply fears, driving oil prices decrease more than a quarter since the beginning of the year. China consumes about 12% of the world’s crude oil which follow behind U.S. consumption.
“No matter how one looks at the fundamental data, every angle points toward lower prices, as supply is continuing to outstrip demand,” said Dominick Chirichella, oil analyst at the New York-based Energy Management Institute.
China announced its economy grew 6.9% in 2015 on Tuesday which was the slowest growth rate during past 25 years. Emerging markets--including China--are important areas for oil-demand growth in the coming decades. In developed countries, many economists believe, oil consumption is near or past its top level as consumers and companies have become more fuel-efficient.