Oil has rebounded to above $40 US a barrel, encouraged by the sharp rebound in U.S. stocks yesterday and fresh signs that the country's economy is growing strongly.
The West Texas Intermediate crude contract rose $2.85 or more than seven per cent on Thursday at mid-morning at $41.46 US a barrel. It had been below $40 since last Friday.
Brent oil, the most important international contract, was also up 6.9 per cent at $46.12 US a barrel.
- Oilpatch pain will continue, say 3 wise men
The optimism is fuelled in part by the recovery in stock prices. China's main index stopped its chain of losses on Thursday and was up 5.3 per cent after North American stocks moved sharply higher on Wednesday.
European markets also advanced. By the time North American markets opened there was more good news – the U.S. economy expanded by 3.7 per cent in the second quarter, which reinforces the idea that the U.S. is re-establishing itself as an engine of global growth.
Oil's recovery was good news for the Canadian dollar, which moved as high as 75.83 cents US Thursday morning after trading at or below 75 cents for three days. At mid-morning, the loonie was worth 75.69 cents US.
An international oversupply of oil has brought the price of WTI down 60 per cent in the past year, resulting in lower investment in the oil patch and a marked slowing of the Canadian economy.
One of the fallouts has been a decline in Canadian small business confidence, an indication that small businesses forecast more economic weakness in the second half of the year because of the energy slowdown.
The Canadian Federation of Independent Business barometer dropped again in August, giving up about two points to reach 56.7, the lowest reading this year.