Oil futures regained positive momentum after a morning of up-and-down trading Thursday, building on strong gains scored after an unexpectedly large drop in gasoline supplies on Wednesday.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September (CLU6, +2.40%) rose $1.10 a barrel, or 2.7%, to settle at $41.93 a barrel. Oil pushed solidly higher after flipping between gains and losses in early action, marking its biggest two-day percentage gain since June 29.
Oil has been under pressure as traders wrestle with a global glut of crude and worries about the outlook for global economic growth. Futures fell below $40 a barrel earlier this week on worries about a global glut.
The rebound back above $40 came as “traders attempt to balance declining North American production levels and expectations of increasing global fuel demands (the EIA forecasts global oil demand to increase by 1.3M barrels a day in 2017) in the coming year against the near glut levels of global petroleum inventories that overhang the market,” wrote analysts at TFS Energy, in a note.
October Brent crude (LCOV6, +2.62%) on London’s ICE Futures exchange rose $1.19, or 2.8%, to $44.29 barrel, after rallying $1.30, or 3.1% to $43.10 a barrel Wednesday.
U.S. oil bounced Wednesday after U.S. government data surprised traders with a 3.3 million-barrel decline in gasoline inventories. Changes to fuel inventories are of particular interest to traders, as a renewed glut of fuel has pushed oil prices lower in recent weeks. Oil prices had entered a bear market, defined as a fall of 20% or more from a recent high, earlier in the week.
The deep fall in gasoline stockpiles contrasted with a rise in crude inventories, but “the market chose to ignore the bearish, counter-seasonal and surprising build in crude oil,” said Michael Wittner, energy analyst at Société Générale,
The focus in the oil market in recent weeks has once again shifted to the perceived supply glut world-wide. Many market watchers had expected supply and demand to reach equilibrium later this year, helped in part by strong appetite for imported oil in China. Yet anticipation has risen in recent weeks that more production may return to market from Libya and Nigeria, both of which have been beset by supply disruptions in recent months.
September natural-gas futures (NGU16, -0.49%) lost 0.5 cent, or 0.2%, to close at $2.834 per million British thermal units, unable to hold gains scored after the Energy Information Administration said the amount of the fuel in storage fell by 6 billion cubic feet—marking the first summertime drawdown since 2006. A survey by The Wall Street Journal found analysts, on average, had expected storage to grow by 1 billion cubic feet.
Nymex reformulated gasoline blendstock for September (RBU6, +1.28%) —the benchmark gasoline contract—rallied 1.81 cents, or 1.3%, to finish at $1.3680 a gallon, while September heating oil (HOU6, +2.60%) rose 3.84 cents, or 3%, to $1.3259 a gallon.
By: William Watts and Dan Strumpf (MarketWatch).
Contributing: Barbara Kollmeyer.
Photo: The Telegraph.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
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