Oil gains 2nd day on dollar, rebound hopes3 min read . Updated: 26 Aug 2010, 12:07 PM IST
Oil gains 2nd day on dollar, rebound hopes
Oil gains 2nd day on dollar, rebound hopes
Singapore: Oil rose for a second day on Thursday after a five-session losing streak took prices to 11-week lows, rekindling interest on the basis of technical indicators pointing to a rebound.
A drop of about 0.3% in the dollar’s value against a basket of currencies on Thursday also raised the appetite for exposure to commodities as Asian stocks rose.
New US home sales slumped to the slowest pace on record in July and orders for costly durable goods were weak, data showed on Wednesday, heightening fears the economy was at risk of another downturn.
A negative mood also prevailed in the US oil market on Wednesday after government statistics showed the nation’s total petroleum stockpiles rose to a fresh all-time high last week, with gains across the board.
US crude for October delivery rose as much as 45 cents to $72.97 a barrel and was up 17 cents at $72.69 by 12:53pm. It rose more than 1% on Wednesday, having touched $70.76, the lowest since early June. Prices have dropped about $10 from a peak of almost $83 on 4 August. ICE Brent climbed 14 cents to $73.62.
“After so many days of the market losing steam, this could be just some sort of relief rally," said Serene Lim, a Singapore-based oil analyst at ANZ.
“It could also be that the market has already priced in some very bad news and that is why, despite the inventory and economic data, we could see some strength."
Front-month US crude futures’ 14-day relative strength index (RSI) fell to just above 30 on Tuesday, a technical indication it was nearing an oversold condition, and then bounced on Wednesday to above 35, according to Reuters data, as taking profits on short positions after a five-day losing spell became attractive.
“For bullish investors, they might want to take the opportunity to buy at these low levels," Lim said.
Crude oil inventories at the key Cushing, Oklahoma, delivery hub fell 779,000 barrels to 36.3 million in the week to Aug 20, about the only bullish feature in a weekly inventory report from the Energy Information Administration published on Wednesday.
Markets will focus on US jobless claims due out later on Thursday and US second-quarter gross domestic product due for release on Friday.
A slowdown in the manufacturing sector as indicated by the weak durable goods orders report “does not offer much hope for a bounce in diesel demand heading into September," Harry Tchilinguirian, a commodity strategist at BNP Paribas, said in a weekly note.
“Similarly, labour markets offer scant support to gasoline demand, and with the end of the driving season around the corner, seasonal support will begin to fade," he added.
Contagion from rising stock markets on Wednesday and Thursday allowed the oil market to shrug off a bigger-than-expected gain in total US crude inventories, which rose by 4.11 million barrels, according to the EIA.
Gasoline inventories were 2.27 million barrels higher, at odds with forecasts of a small drawdown. Distillate stocks, which include heating oil and diesel, increased by a larger-than-expected 1.76 million barrels.
In aggregate, commercial crude and product stocks rose to 1.139 billion barrels last week, topping the record weekly high of 1.13 billion barrels set in the week to 13 August.
Also sending bearish signals, forecasters revised downwards their expectations of the oil price both for this year and next, a Reuters poll showed on Wednesday.
Japan’s Nikkei average rose 0.5% on Thursday, buoyed by short-covering in exporters’ shares after four days of falls and as the yen pulled back slightly from a 15-year high hit earlier this week.
Wall Street stocks initially fell on Wednesday’s negative economic indicators, but rebounded to end slightly higher and snap a four-day losing streak as bargain-hunters inched back into the market.
A big high-frequency trading firm faces possible civil charges by regulators after its computer ran amok and sparked a frenzied $1 surge in oil prices in February, according to documents obtained by Reuters and sources familiar with the continuing investigation.
Tropical Depression Seven in the far eastern Atlantic Ocean strengthened into Tropical Storm Earl late Wednesday, the US National Hurricane Center said in its latest advisory.
Early computer models show the system eventually steering northwest toward Bermuda and away from key oil and gas producing areas in the Gulf of Mexico, in a similar path to that expected to be followed by Hurricane Danielle.