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Oil Price Spike As Jittery Markets Recover

Oil Price Spike As Jittery Markets Recover

The recovery to global equity markets has helped the oil price stage its biggest daily jump since December 2008.

Thursday's sharp price rise was also supported by the outage of two important Nigerian pipelines.

Brent crude, the international benchmark, surged by 10% yesterday as it was buoyed by positive economic data coming out of the US.

The Brent crude price is currently trading at $48.00 per barrel - up from a recent low of $42.50 on Monday.

The equity markets also reacted strongly to the US GDP growth revision with the S&P 500 closing 2.4% higher - taking it above where it closed last week.

China also saw stability. Trading in Shanghai on Friday has been far less choppy with the Shanghai Composite Index trading 3.4% higher at 3,125 points - comfortably above the psychologically important 3,000 level.

Despite yesterday's recovery the oil price is still 53% lower than it was this time last year.

The reason behind its huge annual decline can mainly be attributed to Saudi Arabia's decision to maintain production levels.

Normally, the Saudis would curtail production to support the price level but against fierce completion from US shale gas they have chosen to weather the storm of low prices.

Oil experts disagree over the length of time they will be willing or able to maintain output at these price levels.

Many other oil producing nations are "underwater" at these price levels.