Oil prices have jumped more than 13% after reports that China’s stuttering recovery was beginning to make ground
Oil prices have jumped more than 13% after reports that China’s stuttering recovery was beginning to make ground.
Stock markets also made gains, despite a decision by the German constitutional court that appeared to undermine efforts by the European Central Bank (ECB) to orchestrate a eurozone-wide stimulus plan.
The price of Brent crude surged 13.05% to $30.75 a barrel on Tuesday, to continue a week-long increase from below $20.
Analysts said while the better news from China had improved the outlook for oil consumption, there was still a glut of oil on world markets and prices were likely to stay low for the rest of the year.
Chinese manufacturers have found it difficult to increase production while the rest of the world remains in lockdown, but figures from the central bank showing borrowing levels increasing, along with rising expectations that more countries will lift their lockdowns, helped push up oil prices.
Shares in big oil companies rose after the increase in crude, helping to push up stock markets in Europe and the US by more than 1%. The FTSE 100 index of leading UK shares was up 1.7%, Germany’s Dax index rose 2.5% and France’s Cac rose 2.4%.
Global stocks are now 24% above their March lows, mostly after investors piled into internet and IT stocks, including Facebook, Amazon and Microsoft.
Bjarne Schieldrop, the chief commodities analyst at the Nordic bank SEB, said: There is no doubt that the world to a large degree moved to an almost standstill for a while and that oil demand has been hurt badly.
The key question is how badly, and how quickly it will recover. The uncertainty over demand is huge, the range is wide and the magnitude of the demand shortfall for any of the estimates are all off the historical scale, Schieldrop said.
Germany’s constitutional court jolted eurozone investors and hit the value of the euro after judges warned that the ECB’s plans to flood the financial system with cheap credit could breach German law.
The ruling by the court in Karlsruhe came after judges agreed that Germany’s central bank must stop cooperating with the ECB’s long-running stimulus scheme within the next three months unless the ECB could prove it was not excessive.
Analysts said the decision highlighted the constraints on the ECB as a lender of last resort compared with the more independent US Federal Reserve, the Bank of Japan and the Bank of England, as it wrestled with the biggest economic crisis in peacetime after the Covid-19 outbreak.