Oil prices and commodity-related ETFs bounced Tuesday on hopes of improved global growth as China considers enacting stimulus measures to prop up a faltering economy.
On Tuesday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, gained 2.9% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, increased 2.6%.
Meanwhile, WTI crude oil futures rose 3.1% to $52.1 per barrel and Brent crude was up 2.8% to $60.6 per barrel on Tuesday.
Crude oil prices strengthened after Chinese officials said they would increase efforts to spur economic growth amid the slowdown on the heels of the ongoing trade spate with the U.S., which helped prop up the demand outlook for oil and other raw materials for a potentially reviving global economy, the Wall Street Journal reports.
Beijing will improve credit availability
Beijing will improve credit availability for smaller companies, raise infrastructure investment and cut taxes as the trade negotiations with the U.S. continues.
“Essentially we have gone from pricing a recession back to a more moderate outlook within the span of just six weeks,” analysts at consulting firm JBC Energy said in a note. “Recent optimism, among other aspects, has probably been built on the perceived improvement in U.S.-Sino relations, as well as China’s efforts to stimulate its economy.”
Related: Top 34 Oil ETFs
Nevertheless, some traders have taken the positive news with a grain of salt as inventories remain elevated in the ongoing global supply glut, with economic data around the world undershooting expectations.
“Looking ahead, the market mood should continue to see pessimism fade and optimism grow, which would bring some tailwinds to oil prices in the near term,” Norbert Ruecker, head of macro and commodity research at Julius Baer, told the WSJ, adding that “The oil market remains amply supplied and prices are set to trade rangebound.”
For more information on the energy sector, visit our energy category.