Singapore: Oil stabilised above $76 on Thursday after two days of losses, mirroring steady Asian equities after the US Federal Reserve’s dovish outlook.
Japan’s Nikkei average closed little changed on Thursday, after US stocks mostly fell on Wednesday following the Fed’s monetary policy statement, suggesting interest rates will remain near zero longer than expected.
“Oil has picked up off the lows this morning. It had a very sharp sell-off Wednesday after the weak data on housing and the EIA stocks data,” said David Moore, commodities strategist at Commonwealth Bank.
“The little bounce today is more a reaction to the dip last night. Regional equities are stable and the Fed’s affirmation it will keep interest rates low may have also helped.”
US crude for August fell as much as 42 cents to $75.93 a barrel before recovering to $76.38, up 3 cents on the day at 12:20pm, ICE Brent rose 14 cents to $76.41.
US gasoline inventories last week fell by 800,000 barrels, with demand over the past four weeks up 1.2% over the comparable period last year. Distillate stocks rose by 300,000 barrels, while demand jumped 12%.
On Wednesday crude touched $75.17, the lowest since June 15. On Thursday it was up 18% from a May 20 trough below $65, but prices were about $11 lower than their early-May 19-month peak above $87.
“What we see is a market that is still cautious about economic recovery,” said Toby Hassall, an analyst at CWA Global Markets in Sydney. “That feeds into oil demand prospects.”
US crude inventories unexpectedly gained 2 million barrels last week, according to a government report on Wednesday, while data showed new home sales fell at a record pace in May to their lowest in more than 40 years.
In the US Gulf, BP said it had reinstalled its oil syphon cap at its leaking well off the southern United States. At the same time, the Obama administration appealed a court ruling that blocked its six-month moratorium on deepwater oil drilling.
“Obama’s attempts to restrict deepwater drilling are at odds with another policy -- to cut dependence on imported oil,” said Jonathan Barratt, managing director of Commodity Broking Services.
“By taking deepwater supplies out of the equation, US self sufficiency in oil could fall to around 30 percent in 2035 from around 40% if deepwater production is allowed.”
Weather concerns could complicate the picture after the US National Hurricane Center said a tropical wave to the south of Cuba had a 30% chance of becoming a tropical cyclone over the next two days. Storms could hamper cleaning efforts and curb oil production in the Gulf of Mexico.
In other news, the Paris-based International Energy Agency on Wednesday said crude supplies would be comfortable for five years, further stoking bearish sentiment in the oil market.