NEW YORK (CNNMoney.com) -- After ending August in a slump, oil prices surged into September, rallying nearly 3% Wednesday, and continuing to move higher Thursday following news of an oil platform explosion in the Gulf of Mexico.
"August was the worst month for oil since last May, with oil bulls really getting beat up as economic data started to turn South," said said Phil Flynn, a senior market analyst at PFG Best. "But we went out of August like a lamb and into September like a lion."
After a strong start to the month, news that an oil platform owned by Mariner Energy (ME) exploded in the Gulf of Mexico helped modestly support prices, which climbed 1.5% Thursday, following a 3% jump during the previous session.
Platform explosion: The platform explosion, which took place on Mariner's Vermilion Oil platform 380, occurred at least 80 miles south of Vermilion Bay on the Louisiana coast.
But the event is unlikely to move prices dramatically, said Chris Lafakis, an associate economist at Moody's Economy.com.
"The indications are that this rig explosion is not going to significantly affect U.S. production because it would be such a small portion of crude oil supply being taken off the market," said Lafakis. "So the impact on prices would be miniscule."
The United States only provides 5 million barrels of oil a day, whereas global supply is 85 million a day. And of the 5 million barrels the U.S. produces, offshore production only accounts for about a fourth of total U.S. crude oil production, said Lafakis.
"If you look at the Deepwater Horizon (explosion), it wasn't even a production well, it was for exploration, so that didn't do much to prices," he said. "And even if the [Mariner] rig was a producing well, one well being taken offline is not really going to have much of an influence on global supply and demand."
Brightening economic outlook: Disappointing reports on housing, jobs and economic activity dragged oil prices 9% lower last month as investors worried about the health of the economy and global demand for oil.
But sentiment has taken a slight turn for the better as September begins, with an upbeat report on manufacturing getting the ball rolling on Wednesday.
"Throughout the recovery, manufacturing has been one bright spot, so earlier when regional manufacturing numbers weren't coming in as good, people thought the bright spot was starting to dim," Flynn explained. "But this report showed that the bright spot has once again moved out from behind the clouds."
Meanwhile, a reading on consumer confidence in August came in better-than-expected, and a separate report showed a 5.2% jump in pending home sales for July.
Still not out of the woods: The mood could quickly turn sour if more economic data doesn't improve from the previous month, said Flynn.
On top of that, crude supplies are at the highest level since 1990 and demand is dropping as we enter "shoulder season" -- when it's too late to turn on the air conditioner but too early to turn on the heat -- so oil could easily hit another rough patch.
"Hope springs eternal in the beginning of the month, but the month of September is going to be a tough one for the market," said Flynn. "We're still not out of the woods yet, so the bulls better enjoy the gains while they can."
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.98%||3.95%|
|15 yr fixed||3.05%||3.05%|
|30 yr refi||4.05%||4.03%|
|15 yr refi||3.12%||3.11%|
Today's featured rates:
The midterm elections are around the corner, and the economy remains a top concern. With unemployment down and inflation low, why do people still feel the economy stinks? More
Shares of Facebook recently topped $80. They've more than quadrupled from their post-IPO lows of two years ago. Can Mark Zuckerberg keep the momentum in mobile going? More