Oil jumps on firmer gasoline, US equities; snaps two-day rout
NEW YORK – Oil prices rose as much as 2 percent on Thursday, tracking a surge in gasoline futures and higher US equity markets that helped stem a two-day rout in crude futures.
Oil lost a combined 6 percent in the past two sessions, pressured by data showing large weekly builds in US petroleum products and forecasts by the world’s energy watchdog and OPEC that signaled the global crude glut could persist into 2017.
Selling abated as traders and investors bought to cover short positions, with sentiment bolstered by a 4 percent rally in gasoline futures and near 1 percent rise in the S&P 500 index for U.S. equities.
Gasoline futures shot up as the profit margin for processing crude into the motor fuel hit a one-month high after a leak at the Colonial Pipeline, the nation’s largest carrier system for gasoline.
US equities rose after the dollar gave back early gains on weak U.S. retail sales and factory data that dampened the likelihood of a Federal Reserve rate hike this month.
Brent crude futures were up 85 cents, or 1.9 percent, at $46.70 per barrel by 12:01 p.m. EDT (1601 GMT).
U.S. West Texas Intermediate (WTI) crude futures rose 42 cents, or 1 percent, to $44.
“I think the oil market clearly overreacted to the products build data we had yesterday and that’s indicative of today’s price rebound,” said Jay Hatfield, portfolio manager at New York-based InfraCap MLP, which invests in equities of energy partnerships.
“Also, we’re undeniably in the $40-$50 a barrel range, which means when we get below $45, we are most likely to bounce up.”
Some analysts and traders remained doubtful that the rebound in oil could last beyond a couple of days, pointing to the returning crude supplies from Nigeria and Libya.
Libya’s National Oil Corporation said it was lifting force majeure at three ports and exports will resume immediately at two of them.
In Nigeria, offers for October-loading of its Qua Iboe crude have emerged even as a force majeure remains in place.
“The perception of more supply from Nigeria and Libya is trumping the physical markets,” said Scott Shelton, broker with ICAP in Durham, North Carolina. “The market could care less about strong physical markets when it sees potential for another 600,000 barrels per day of crude.”
U.S. inventories of distillates, which include diesel and heating oil, rose by 4.6 million barrels in the week to Sept. 9, the US Energy Information Administration reported. Analysts had expected an increase of 1.5 million barrels. It was the biggest weekly build since January, putting distillates at six-year seasonal highs. –Reuters