Crude oil flirts with $100 a barrel

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Crude oil has been flirting with $100 (U.S.) a barrel in New York on Thursday, briefly crossing the threshold in early trading. The gain marks an impressive comeback after oil tumbled more than 20 per cent between the end of April and the end of June - a period that coincided with a slew of disappointing economic news from the United States and ongoing concerns about the economic slowdown in China.

Since then, oil has rebounded more than 10 per cent and is now at its highest level in about a month. Why? With developments in the Greek debt crisis and movement in the debate over extending the U.S. debt ceiling, investors have shown greater interest in so-called higher risk assets, and oil definitely falls into that category.

As well, there are some signs that the economic recovery in the United States is showing some signs of strength. On Thursday, U.S. initial jobless claims were in line with expectations and Federal Reserve Bank of Philadelphia's economic index for July rose to 3.2 - above the forecast from economists and marking an impressive rebound from a negative reading last month.

"The overall message [from the Philadelphia Fed index]is that the industrial slowing is over but the rebound is in its infancy," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a note.

The gains in crude oil come nearly a month after the International Energy Agency said it would release 60 million barrels of oil from strategic reserves to help offset oil lost during the conflict in Libya. When the release was announced on June 23, the price of crude fell 4.6 per cent, to about $91 a barrel. However, that marked one of the lowest points for oil during the spring decline and seemed to set the stage for this summer's impressive rebound.

On Thursday, the International Energy Agency weighed in on that 60-million barrel release, declaring in a 30-day review that the action succeeded in adding liquidity to energy markets and bridging a gap until OPEC could increase its own oil output. However, it also ruled out the need for another round of action.

"Tightness in prompt supply for light sweet crudes has diminished," the IEA said in a press release. "Refining margins, notably upgrading margins, have improved, thus reducing the danger that suppressed refinery activity levels over the summer would lead to a products-driven supply crunch later in the year."