Singapore: Oil was steady under $49 on Wednesday, after weak US economic data sparked a bout of profit-taking overnight, outweighing escalating tensions in the Middle East and widening supply cuts from the Russian gas row.
The market will be watching for weekly inventory data from the US energy department due later on Wednesday, which are forecast to show a jump in stockpiles, and US December employment data, to be released on Friday.
“The EIA weekly inventory numbers and the U.S. unemployment data will be key for near-term price direction,” said Jim Ritterbusch, president of Ritterbusch & Associates.
US crude for February delivery was up 6 cents a barrel at $48.64 by 8:30am, while London Brent was up 7 cents at $50.60.
Data released on Tuesday showed that pending sales of US homes dropped in November to their lowest level in at least seven years and that the country’s services sector shrank for the third consecutive month in December.
A report from the US Energy Information Administration due later is likely to show fuel stocks rising as demand slows, with crude oil inventories seen up 900,000 barrels last week, and distillates and gasoline supplies also expected to have increased.
Further clues about future demand from the world’s largest oil consumer will come when US Labour Department unveils December non-farm payroll and unemployment data on Friday.
Oil prices have risen nearly 50% since the intraday low of $32.40 reached on 19 December, boosted by worries over supply disruptions from Israel’s deepening incursion into Gaza, Russia’s gas row with Ukraine, and mounting evidence of Opec’s compliance with production cuts.
Israel and Hamas studied a proposal by Egypt for a ceasefire in the Gaza Strip on Wednesday that won immediate backing from the United States and Europe.
But Israeli officials also said ministers would discuss a major escalation of their 12-day-old offensive that would push troops deep inside Gaza’s cities and refugee camps in their bid to end rocket fire into Israel by Islamist militant groups.
While the conflict does not directly threaten any oil supplies, unrest in the Middle East can bolster prices because countries in the region pump about a third of the world’s oil.
Also adding support was Russia’s deepening dispute with Ukraine over natural gas prices, which triggered supply disruptions to parts of Europe. This echoed a similar spat three years ago that raised questions about Russia’s reliability as an energy exporter. Evidence of Opec members implementing the group’s biggest ever output cuts also grew on Tuesday as Kuwait and Iran told customers of bigger supply curbs this month in a bid to prop up prices.
The producer cartel has cut output three times since September, in a bid to halt the market’s slide.
But analysts said oil’s rally was likely to be short-lived, especially once the February contract expires later this month.