Brent oil price closes the week trading at 18 month high

Brent oil price ends the week trading at an 18 month high settling $1.58 higher at $87.25 a barrel on the ICE Futures Exchange, as hopes of an improving economy in the US and globally helped make gains in the oil market.

The oil market began to rally after the latest US data on new home sales and durable goods orders painted a picture of improvement in the US economy. New home sales unexpectedly rose by 27% last month, the largest monthly gain in nearly five years.

“The housing number really seemed to give this thing a kick,” said Jim Ritterbusch, president of the trading advisory firm Ritterbusch and Associates. “Anytime you get a favorable economic release it ignites a fresh influx of capital into the oil space.”

Oil’s near-term discount, rising gasoline prices ahead of the U.S. summer driving months, and the prospects of higher oil prices ahead due to economic recovery created an ideal situation for refiners, who can get wider profit margins by buying oil cheaply now and refining it into gasoline and other petroleum products for future sale. The positive conditions boosted activity in the oil markets as buyers interested in taking physical delivery of oil, or in hedging their exposure to future price fluctuations, increased their trading activity.

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