Singapore: Crude bounced from a seven-week low on Wednesday as investors looked for relief in US durable goods and oil inventory reports due later in the day, after fears of a double-dip recession intensified with dismal housing data.
US crude for October delivery added 17 cents to $71.80 a barrel by 6:66am, after trading as low as $71.32, replicating Tuesday’s trough, which was the lowest intraday price since 6 July. The front-month contract on Tuesday ended at $71.63, the lowest settlement since 7 June.
Oil slid 2% on Tuesday on news that sales of previously owned US homes dropped by a record 27.2% in July, sending global equities to one-month lows. Japan’s Nikkei average fell to its lowest in 16 months on Wednesday after the yen hit a 15-year high versus the dollar.
But US crude stockpiles unexpectedly fell last week, an industry report showed late on Tuesday, raising some hope that government statistics due later today would show an improvment in oil demand by the world’s largest user.
“The double-dip worries are everywhere at the moment and this is weighing on market sentiment,” said Stefan Graber, a commodities analyst with Credit Suisse in Singapore.
“What could bring some relief would be an improvement in US oil consumption figures. Durable goods orders could also be an important number today, and in case we see positive data, this could ease the immediate concerns and spill into the oil market.”
The front-month US crude contract also touched oversold territory for the first time in three months on Tuesday, according to the relative strength technical indicator, which signals a rebound is to be expected.
“We think that the current sell-off in oil is a bit overdone,” Graber said. “The US is still showing considerable pockets of weakness, but if we look at the global picture, the outlook is more constructive.”
US crude stocks posted a surprise drop of 1.8 million barrels in the week ended Aug 20, according to a weekly report from the American Petroleum Institute late on Tueaday, ahead of government statistics to be released on Wednesday by the Energy Information Administration at 8:00pm. Forecasts are for a 200,000-barrel gain, a Reuters poll showed.
But US gasoline stockpiles unexpectedly rose by almost 700,000 barrels last week, the API said, while inventories of distillate fuel, including diesel, rose a larger-than-predicted 1.9 million barrels.
Last Wednesday, the EIA said US combined commercial stockpiles of crude and refined products in the week to 13 August hit the highest level since weekly records began in 1990, and the highest level since 1980 according to the agency’s monthly data.
On Tuesday, MasterCard said U.S. weekly retail gasoline demand fell 1.2% in the week ending 20 August, despite lower prices.
Total US crude trading volume was at more than 555,700 on Tuesday, surpassing Monday’s 415,365 total, but slightly below the 30-day average of more than 587,500 per session.
US RBOB gasoline futures on Tuesday touched $1.8368 a gallon, the lowest intraday price since December 2009, rebounding to $1.8546 on Wednesday.
Hurricane Danielle in the central Atlantic Ocean unexpectedly weakened again and was downgraded to a tropical storm, the US National Hurricane Center said in its latest advisory.