Oil prices rally 9% — making it biggest one-day gain in years

JEDDAH: There were all-round cheers as oil prices showed their first signs of recovery on Thursday.

In fact, at 9 percent higher, they represented the biggest one-day rallies in years, according to economists.
"We haven't seen such a large single rally on one day in years," one of them said.
The rally also signified recovery of equity markets, and news of diminished crude supplies set off a short-covering surge by bearish traders.
Snapping back fiercely from a deep two-month slum that reached 6-1/2 year lows this week, oil gained as world stock markets rose on hopes that Chinese government measures to stimulate the economy would pay off, while the dollar strengthened as risk aversion eased, Reuters reported.
Major Gulf stock markets rose sharply on Thursday.
The Saudi Arabian Tadawul All-Share Index climbed 2.98 percent to 7,604.32 points. The Petrochemical Industries index surged 5.25 percent to 4,989.26 points.
The value of traded shares reached SR7.99 billion on Thursday.
The Tadawul index now rebounded 10 percent from a 29-month low of 6,921 points hit on Monday, but remains 16 percent below its level at the end of last month.
More than reversing the past week's losses, front month Brent crude rose $3.65 to $46.77 a barrel, hitting session high of $46.85. On Monday, the contract had struck a March 2009 low of $42.23.
It is on track for the biggest one-day gain for the contract since late January, when Brent ripped off six-year lows to rise by nearly $10 in three days, the start of a recovery that stabilized prices through the second quarter, Reuters said.
US crude's front-month surged by almost 10 percent, rising $3.65 to $42.25, closing in on its biggest one-day percent gain since June 2012. It had hit a February 2009 low of $37.75 on Monday.
Brent, the global benchmark for oil, lost about $5 a barrel, or 14 percent, over the past six sessions on worsening fundamentals from a supply glut as well as weak technicals.
Commenting on oil price surge, Basil Al-Ghalayini, CEO of BMG Financial Group, said: “ Obviously, after bleeding for a week, the Saudi stock market recovered its losses as a direct impact of oil prices' hike by almost 9 percent on Thursday. We haven't seen such a large single rally on one day in years.”
However, he said: “The Saudi economy, and its stock market, will always be affected by oil prices volatility.”
John Sfakianakis, Middle East director at Ashmore Group, told Arab News: “Oil prices have a close correlation to the stock market. If oil prices continue to rise, it should have a positive effect on investor confidence. The general trend in global markets as well as oil will determine the direction of TASI next week. A bottom for oil and the Saudi market could have been reached at these levels.”
London-based James Reeve, deputy chief economist and assistant general manager Samba Financial Group, said: “The rebound in oil prices will probably give a boost to the Tadawul, and we do see oil prices moving a bit higher in the near term.”
But, he added: “The average this year ($ 60 a barrel) for Brent is still well down on last year. We remain worried about China and oil demand is likely to soften there.”
Reeve said: “The Saudi government might actually cut capital spending next year, so economic growth is likely to be much weaker than this year. This will keep the Tadawul subdued next year.”