Higher Oil Prices May Not Be So Temporary

Oil prices have been subject to big swings this year. Since June, though, fundamental demand factors have been supportive, and with global economic growth firming, the outlook for oil is bright.

The significant -- and surprising -- midyear crude oil price selloff was triggered at the beginning of June by China’s Caixin PMI for May, which showed a contraction in monthly manufacturing activity for small and medium-sized manufacturers. The risk that Chinese growth might stall was too great for oil traders to ignore, and prices fell hard. But the country’s manufacturing has been on an expansionary path since. And the outlook for the biggest net importer of crude has strengthened.