CRANBURY, N.J. (DTN) — New York Mercantile Exchange nearby delivery oil futures rallied in overnight trading following Monday’s federal holiday in observance of Martin Luther King Jr. Day on optimism for the U.S. economy in 2012 and growing expectations that China’s central government will implement stimulus measures to spur economic growth.
The market view that emerged earlier this month gained currency after China reported annualized fourth quarter 2011 Gross Domestic Product growth at 8.9%, which was greater than anticipated. Estimates peg Chinese 2011 GDP growth at 9.0% while slipping to 8.5% this year.
In 2011, China took several steps to rein in inflation, including interest rate hikes and requirements that banks hold greater reserves, both aimed at reducing loans that fueled speculative growth in housing. Some analysts expected the Chinese economy to have a hard landing, sparked by an inflated real estate market and drop in exports amid the European Union’s debt problems and austerity measures. Others, including global political risk firm Eurasia Group President Ian Bremmer, expect China to engineer a soft landing, in which Beijing maintains economic growth, albeit at a slower pace.
The U.S. dollar weakened while the euro surged, climbing despite a series of credit downgrades for nine European Union countries issued by Standard and Poor’s on Friday (1/13) over high debt and government policy seen lacking the ability to successfully overcome structural issues in the EU. Following the country downgrades, which included France losing its AAA+ rating while Spain and Italy were each downgraded by two notches, S&P lowered the credit rating of Europe’s rescue fund from AAA+ to AA+.
The overnight rally came despite the end of strikes in Nigeria, a member of the Organization of the Petroleum Exporting Countries, with unions there late last week threatening to shut down the African nation’s oil production. The union called off strikes protesting the end of fuel subsidies after Nigerian President Goodluck Jonathan offered a compromise, subsidizing roughly 33% of fuel costs.

