Singapore: US crude oil fell almost 1% on Thursday, weighed down by gains in the dollar, but a big drawdown in US gasoline stocks, a weak longer-term outlook for the greenback and positive technicals all supported.
A US Energy Information Administration report showing a larger-than-expected 2.3 million barrel draw in gasoline stocks last week saw oil rally 2.8% in the previous session to settle at $81.37, its highest since 9 October, 2008.
“Oil is in an upward trend. The dollar is under fire. Inventories are a bit of an issue, but I wouldn’t be surprised to see crude take out $83 to $85 by month end,” said Peter McGuire, managing director of CWA Global Markets in Sydney.
“That’s sustainable possibly for the rest of the quarter but it really all depends on the US dollar.”
NYMEX crude for December delivery fell 42 cents to $80.95 a barrel by 0335 GMT. London Brent crude fell 36 cents to $79.33 a barrel. The dollar rose above $1.50 against the euro and away from a 14-month low against a basket of currencies, but expectations that the US Federal Reserve will lag other central banks’ interest rate rises mean the longer-term outlook for the greenback remains weak.
The market is keeping a close eye on the options market where a large number of calls at strike prices between $80 and $100 could drag futures prices higher as options granters buy oil against the risk that those options will be exercised.
“From our perspective, as the price moves towards the strike, we hedge by buying the future, which can drive prices higher, bringing fresh strikes into the money and so on,” a Singapore trader said.
While a number of technical chart patterns are positive, the relative strength indicator at around 80 to 85 for the past week, is its most overbought since late May and June, suggesting the market needs a period of consolidation.
“Technicals are quite bullish. Support, resistance and MACD all point higher,” a second trader in Singapore said.
“On a daily chart, the next level is about $90, although I expect some psychological resistance at $85. But I think it will run out of steam and will return to the $65-75 range.”
Investors were also likely to be reassured after data showed China’s annual GDP growth quickened to 8.9% in the third quarter, in line with expectations for the world’s second biggest oil consumer.
The country’s September refinery crude throughput rose 14% from a year earlier to a record of 32.83 million tonnes, or 7.99 million barrels per day.