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Oil gains a second day as jobs data eases concerns
Source: Agencies |
August 27, 2010, Friday
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OIL advanced for a second day yesterday after a modest improvement in US jobs data eased some concerns about the economy's recovery.
Oil futures found strength from the data, which showed that first-time filings for US claims for unemployment benefits fell more than expected last week, though the four-week filings average rose to the highest level since late November.
Oil investors weren't swayed by Wall Street, where early gains on the jobless claims data fizzled out as enthusiasm from the jobless claims data waned.
Benchmark US crude futures for October settled at US$73.36 per barrel, up 84 cents, or 1.16 percent. It reached a high of US$73.98, up US$1.46.
Crude futures volume was heavy, at more than 700,000 lots.
The contract rose more than 1 percent on Wednesday after touching US$70.76, the lowest front-month contract price since early June, as investors shrugged off data showing US crude and product supplies rose across the board last week to post a new high.
Later month contracts traded up even stronger, in reaction to bloated inventories, analysts said.
"The contango is widening and that is a logical reaction to inventories building up so much as it is more economical to store," said Dominick Chirichella, senior partner at Energy Management Institute in New York.
Analysts said further support for the widening contango, when prompt futures trade at a discount to later months, came from the looming autumn refinery maintenance season, when crude demand typically ebbs before picking up for the winter.
ICE Brent ended up US$1.54, or 2.1 percent, at US$75.02, also rising for a second day. Brent's premium against the US benchmark crude went as high as US$1.80, highest since June 3, reflecting better-balanced Brent supplies than those in the US, according to analysts.
Support for oil futures came early as the dollar fell against a basket of currencies. A weaker dollar often supports commodities because most are priced in the US currency.
"The dollar's weakness is lending support to crude futures today and gains reflect a follow-through from the breakout from 11-week lows yesterday," said Tom Knight, trader at Truman Arnold, in Texarkana, Texas.
"This is a technical bounce after recent weakness (and) an improved cash market in the Gulf Coast, due to some refinery turnarounds, is also helping in this relief rally," he added.
Front-month US crude futures' 14-day relative strength index (RSI) fell to just 30 on Tuesday, a technical pointer to oversold conditions, but has since bounced to around 40, Reuters data show, partly on profit-taking from short positions.
However, oil's two-day gains "has all the hallmarks of an upside correction or retracement in an otherwise falling market," brokers at PVM Oil Associates in London said.
Investors await a gathering of central bankers from around the world yesterday at the Jackson Hole, Wyoming, mountain resort to assess the darkening economic outlook.
In a speech today, US Federal Reserve Chairman Ben Bernanke is likely to discuss the uncertain prospects for the economy, but isn't expected to give many clues about whether the central bank will pump more cash into the economy to keep the recovery going.
Also being awaited, the US government today is expected to revise second-quarter gross domestic product growth lower to an annual pace of 1.4 percent, from 2.4 percent, according to a survey.
The US Energy Information Administration on Wednesday said that US crude and product inventories all rose last week. In total, commercial crude and product stocks rose to 1.139 billion barrels, topping the record weekly high of 1.13 billion barrels set in the week to August 13.
Oil futures found strength from the data, which showed that first-time filings for US claims for unemployment benefits fell more than expected last week, though the four-week filings average rose to the highest level since late November.
Oil investors weren't swayed by Wall Street, where early gains on the jobless claims data fizzled out as enthusiasm from the jobless claims data waned.
Benchmark US crude futures for October settled at US$73.36 per barrel, up 84 cents, or 1.16 percent. It reached a high of US$73.98, up US$1.46.
Crude futures volume was heavy, at more than 700,000 lots.
The contract rose more than 1 percent on Wednesday after touching US$70.76, the lowest front-month contract price since early June, as investors shrugged off data showing US crude and product supplies rose across the board last week to post a new high.
Later month contracts traded up even stronger, in reaction to bloated inventories, analysts said.
"The contango is widening and that is a logical reaction to inventories building up so much as it is more economical to store," said Dominick Chirichella, senior partner at Energy Management Institute in New York.
Analysts said further support for the widening contango, when prompt futures trade at a discount to later months, came from the looming autumn refinery maintenance season, when crude demand typically ebbs before picking up for the winter.
ICE Brent ended up US$1.54, or 2.1 percent, at US$75.02, also rising for a second day. Brent's premium against the US benchmark crude went as high as US$1.80, highest since June 3, reflecting better-balanced Brent supplies than those in the US, according to analysts.
Support for oil futures came early as the dollar fell against a basket of currencies. A weaker dollar often supports commodities because most are priced in the US currency.
"The dollar's weakness is lending support to crude futures today and gains reflect a follow-through from the breakout from 11-week lows yesterday," said Tom Knight, trader at Truman Arnold, in Texarkana, Texas.
"This is a technical bounce after recent weakness (and) an improved cash market in the Gulf Coast, due to some refinery turnarounds, is also helping in this relief rally," he added.
Front-month US crude futures' 14-day relative strength index (RSI) fell to just 30 on Tuesday, a technical pointer to oversold conditions, but has since bounced to around 40, Reuters data show, partly on profit-taking from short positions.
However, oil's two-day gains "has all the hallmarks of an upside correction or retracement in an otherwise falling market," brokers at PVM Oil Associates in London said.
Investors await a gathering of central bankers from around the world yesterday at the Jackson Hole, Wyoming, mountain resort to assess the darkening economic outlook.
In a speech today, US Federal Reserve Chairman Ben Bernanke is likely to discuss the uncertain prospects for the economy, but isn't expected to give many clues about whether the central bank will pump more cash into the economy to keep the recovery going.
Also being awaited, the US government today is expected to revise second-quarter gross domestic product growth lower to an annual pace of 1.4 percent, from 2.4 percent, according to a survey.
The US Energy Information Administration on Wednesday said that US crude and product inventories all rose last week. In total, commercial crude and product stocks rose to 1.139 billion barrels, topping the record weekly high of 1.13 billion barrels set in the week to August 13.
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