Singapore: Oil eased below $83 a barrel on Thursday, surrendering some of the previous day’s gains when prices surged more than 1%, buoyed by a weaker dollar and signs of improving US oil product demand.
A slew of US economic data due later in the day, including weekly jobless claims and February leading indicators, will offer more clues on the pace of recovery in the world’s largest economy and the outlook for energy demand.
US crude for April delivery shed 38 cents to $82.55 a barrel by 8:22am, after settling $1.23 higher on Wednesday. London Brent crude for May fell 39 cents to $81.57.
“The market’s undertone is pretty firm, and seems to be grasping at every single bit of news that is not worse than expected as an excuse to rally,” said Clarence Chu, a trader at Hudson Capital Energy Asia in Singapore.
“But we see a huge roadblock ahead at the $83.95 level - it’s going to be very tough to get past that, and a lot of profit-taking will emerge at that level,” he said, adding that he expected a narrow trading range of $80-$83 over the next week.
Oil got a boost on Wednesday from the US Energy Information Administration’s report showing that oil product demand in the world’s top energy consumer was up 3.5% last week from a year ago.
US distillate inventories fell 1.5 million barrels and gasoline stocks dropped 1.7 million barrels, deeper than expectations for a 1.1 million-barrel drawdown and an 800,000-barrel decline respectively.
Sentiment was also buoyed by Opec’s decision to leave output targets unchanged at its policy-setting meeting in Vienna.
Members of the Organization of the Petroleum Exporting Countries, which pumps roughly one in every three barrels of oil, maintained official cuts of 4.2 million barrels per day (bpd).
Since curbing output in December 2008 as the economic crisis intensified, Opec has seen prices rally from below $40 a barrel to a peak of $83.95 in January, despite lower compliance from some members in recent months.
On Thursday, the US dollar recovered some of its losses against higher-yielding currencies made the previous day, as investors trimmed short dollar positions.
The US currency had fallen on Wednesday after a benign inflation reading supported the Federal Reserve’s renewed pledge to keep interest rates near zero for a few more months.
Further price support came from news that Russian oil major Rosneft faces a possible export deadlock after bankrupt rival YUKOS won US and British court injunctions, making cash payments to the state oil company in the West very complex.
Rosneft declined to comment on the injunctions, which trade and industry sources said were part of a legal battle between YUKOS and the Russian government, which dissolved YUKOS after intensifying pressure on the company between 2003 and 2007. Most of the assets ultimately ended up with Rosneft.
At 7:30pm, the US Labor Department will unveil first-time claims for jobless benefits for the week ended 13 March. Economists forecast a total of 455,000 new filings, down from 462,000 in the prior week.
The Conference Board will also release its report on February leading economic indicators. Economists forecast a 0.1% rise, compared with a 0.3% increase in the prior month.