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Oil ends higher a second straight day Thursday as traders take cue from a stock-market bounce

By Mayra P. Saefong

Petroleumworld 10 25 2018

Oil futures ended higher Thursday as a rebound in equity markets signaled a momentary return to a risk-on sentiment, giving U.S. benchmark prices an incentive to move up for a second session in a row.

The Energy Information Administration reported Wednesday that U.S. oil stockpiles rose for a fifth straight week , up 6.3 million barrels in the week ended Oct. 19. The data, however, also revealed a drop of 4.8 million barrels in gasoline stockpiles—over three times more than expected.

Despite the hefty rise in domestic crude stockpiles, a lot of attention Wednesday was on the drop in the equities market as well as concerns surrounding global oil demand, said Robbie Fraser, commodity analyst at Schneider Electric.

“With oil setting up for the worst monthly price drop in over two years, concerns remain on trade tensions over global demand and traders are going to continue focusing on Iran and how much oil will exit the marketplace” when U.S. sanctions on Tehran begin early next month, he said in a daily note.

West Texas Intermediate crude for December delivery CLZ8, -0.53%  on the New York Mercantile Exchange added 51 cents, or 0.8%, to settle at $67.33 a barrel, following a gain of 0.6% a day earlier. Month to date, prices based on the front-month contracts were down more than 8%, which would be the largest monthly loss since July 2016, according to FactSet data.

December Brent crude LCOZ8, +0.74%  added 72 cents, or nearly 1%, to $76.89 a barrel after a loss of nearly 0.4% Wednesday.

“Falling stock markets are continuing to generate strong headwind. This expresses a growing concern about economic development, which would also have an impact on oil demand,” wrote analysts at Commerzbank, in a note.

U.S. stock indexes were moving higher on Wall Street Thursday as oil futures settled. The Dow Jones Industrial Average DJIA, +1.63%  had tumbled more than 600 points Wednesday , while the S&P SPX, +1.86%  tumbled and the Nasdaq Composite COMP, +2.95%  fell into correction territory, defined as a drop of at least 10% from a recent high, for the first time in two years.

While the stock-market carnage rings alarm bells over demand, data show it remains robust, the Commerzbank analysts noted, with China processing a record amount of crude in September.

Meanwhile, traders have found reassurance in pledges by Saudi Arabia and others to boost output to offset the barrels to be lost from Iran as renewed U.S. sanctions take effect on Nov. 4.

In other energy trading, November gasoline RBX8, -0.39%  fell 0.5% to $1.813 a gallon, while November heating oil HOX8, -0.25%  added nearly 1.2% to $2.278 a gallon.

Natural-gas futures climbed Thursday, looking to recoup most of their losses from a day earlier.

November natural gas NGX18, -0.97%  rose 1.1% to $3.202 per million British thermal units.

The EIA said Thursday that domestic supplies of natural gas rose by 58 billion cubic feet for the week ended Oct. 19. Analysts surveyed by S&P Global Platts had forecast a build of 54 billion. However, the agency also noted that the latest inventory figures include a “reclassification” of certain stocks in storage in the South Central region. That lowered working gas stocks by about 5 billion cubic feet.


Story by Mayra P. Saefong from MarketWatch.

10 25 2018 19:14 GMT

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