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Oil up, shrugs data, ends 5-day losing streak
Source: Agencies |
August 26, 2010, Thursday
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US crude oil futures ended more than 1 percent higher yesterday, rebounding from an 11-week low and five days of losses as the market shrugged off government data showing across-the-board rises in crude oil and product inventories last week.
Oil traders said oil futures got a lift from Wall Street, where all major indexes rose in late bargain hunting after being hobbled by weak housing data earlier.
Also supportive for crude futures were heating oil futures, which also recovered from a five-day losing streak to end nearly 2 percent higher.
Oil prices regained their footing despite persistent worries that the economic recovery was stalling and with it keep oil demand sluggish.
US crude for October delivery settled up 89 cents at US$72.52 a barrel, after falling as low as US$70.76, the lowest price since early June. October ICE Brent ended up US$1.10, or 1.5 percent, at US$73.48 a barrel, gaining strength after five consecutive days of losses.
Crude futures' 14-day relative strength index (RSI) fell to just above 30 on Tuesday, a technical indication it was nearing an oversold condition, and then bounced yesterday to above 35, according to Reuters data, as taking profits on short positions after the five-day losing spell became attractive.
Disappointing economic data earlier weakened equities, but they edged higher late in the day as a drop through a key technical level in the Standard & Poor's 500 index attracted buying.
"Despite weak economic data and the bearish builds in the EIA inventory report, crude oil futures have not fallen ... as they are attached to what's going on in the stock market," said Richard Ilcyzysyn, senior market strategist at Lind Waldock in Chicago.
Ilczyszyn and other analysts also noted that crude futures had become oversold in the most recent selling binge.
"Markets are extremely oversold after being down for so many days in a row (and) selling momentum dried up," said Tom Bentz, broker at BNP Paribas Commodity Futures Inc in New York.
Heating oil futures rose back from a five-day losing streak, even though total distillate stockpiles were up sharply last week.
"Heating oil has been the leader as there has been that seasonal shift away from gasoline and toward heating oil. At least psychologically anyway," Bentz said.
In New York, September delivery heating ended up 3.49 cents, or 1.8 percent, at US$1.9706 a gallon, recovering from a near seven-week low on Tuesday.
The US Energy Information Administration showed crude inventories rose 4.11 million barrels in the week to Aug. 20, dwarfing a forecast for a build of 200,000 barrels.
However, crude oil inventories at the key Cushing, Oklahoma, delivery hub fell 779,000 barrels to 36.3 million barrels, about the only bullish feature in the weekly report.
Gasoline inventories were 2.27 million barrels higher, at odds with forecasts of a small drawdown. Distillate stocks increased by a higher than expected 1.76 million barrels.
In aggregate, commercial crude and product stocks rose to 1.139 billion barrels last week, topping the record weekly high of 1.13 billion barrels set in the week to Aug. 13.
Oil futures got hammered early as data showed sales of new US single-family homes slumped to the slowest pace on record in July. That came on top of a private sector report on Tuesday that sales of previously owned homes in the same month plunged to their slowest pace in 15 years.
A separate government report showed that orders for long-lasting US manufactured goods, excluding transportation equipment, posted their biggest drop in 1-1/2 years in July.
Also sending bearish signals, forecasters revised downwards their expectations of the oil price both for this year and next, a Reuters poll revealed yesterday.
"A sufficient amount of economic gloom has been rapidly priced in over the past several days, so (today's gains) represent a relief rally. Tomorrow's weekly jobless claims data could be the despairing economic data point du jour sending prices lower still," said John Kilduff, partner at Again Capital LLC in New York.
Oil traders said oil futures got a lift from Wall Street, where all major indexes rose in late bargain hunting after being hobbled by weak housing data earlier.
Also supportive for crude futures were heating oil futures, which also recovered from a five-day losing streak to end nearly 2 percent higher.
Oil prices regained their footing despite persistent worries that the economic recovery was stalling and with it keep oil demand sluggish.
US crude for October delivery settled up 89 cents at US$72.52 a barrel, after falling as low as US$70.76, the lowest price since early June. October ICE Brent ended up US$1.10, or 1.5 percent, at US$73.48 a barrel, gaining strength after five consecutive days of losses.
Crude futures' 14-day relative strength index (RSI) fell to just above 30 on Tuesday, a technical indication it was nearing an oversold condition, and then bounced yesterday to above 35, according to Reuters data, as taking profits on short positions after the five-day losing spell became attractive.
Disappointing economic data earlier weakened equities, but they edged higher late in the day as a drop through a key technical level in the Standard & Poor's 500 index attracted buying.
"Despite weak economic data and the bearish builds in the EIA inventory report, crude oil futures have not fallen ... as they are attached to what's going on in the stock market," said Richard Ilcyzysyn, senior market strategist at Lind Waldock in Chicago.
Ilczyszyn and other analysts also noted that crude futures had become oversold in the most recent selling binge.
"Markets are extremely oversold after being down for so many days in a row (and) selling momentum dried up," said Tom Bentz, broker at BNP Paribas Commodity Futures Inc in New York.
Heating oil futures rose back from a five-day losing streak, even though total distillate stockpiles were up sharply last week.
"Heating oil has been the leader as there has been that seasonal shift away from gasoline and toward heating oil. At least psychologically anyway," Bentz said.
In New York, September delivery heating ended up 3.49 cents, or 1.8 percent, at US$1.9706 a gallon, recovering from a near seven-week low on Tuesday.
The US Energy Information Administration showed crude inventories rose 4.11 million barrels in the week to Aug. 20, dwarfing a forecast for a build of 200,000 barrels.
However, crude oil inventories at the key Cushing, Oklahoma, delivery hub fell 779,000 barrels to 36.3 million barrels, about the only bullish feature in the weekly report.
Gasoline inventories were 2.27 million barrels higher, at odds with forecasts of a small drawdown. Distillate stocks increased by a higher than expected 1.76 million barrels.
In aggregate, commercial crude and product stocks rose to 1.139 billion barrels last week, topping the record weekly high of 1.13 billion barrels set in the week to Aug. 13.
Oil futures got hammered early as data showed sales of new US single-family homes slumped to the slowest pace on record in July. That came on top of a private sector report on Tuesday that sales of previously owned homes in the same month plunged to their slowest pace in 15 years.
A separate government report showed that orders for long-lasting US manufactured goods, excluding transportation equipment, posted their biggest drop in 1-1/2 years in July.
Also sending bearish signals, forecasters revised downwards their expectations of the oil price both for this year and next, a Reuters poll revealed yesterday.
"A sufficient amount of economic gloom has been rapidly priced in over the past several days, so (today's gains) represent a relief rally. Tomorrow's weekly jobless claims data could be the despairing economic data point du jour sending prices lower still," said John Kilduff, partner at Again Capital LLC in New York.
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