MW: Crude futures rise as stocks rally and dollar falls
IEA raises global oil-demand forecasts, but sharp contraction still seen this year
By Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Oil futures surged Wednesday as gains on Wall Street and dollar weakness seemed to overshadow government data showing a bigger-than-expected rise in crude supplies in the past week.
Traders also were awaiting the outcome of the Federal Open Market Committee monetary policy meeting.
Light sweet crude for September delivery was last up $1.21, or 1.7%, to $70.65 a barrel in electronic trading on Globex.
"Stocks and a weaker dollar are driving the trade higher today," said Zachary Oxman, managing director at TrendMax Futures. "I see the stock correlation as the major driver today."
U.S. stocks rose Wednesday, with the S&P 500 index (SPX 1,007, +12.35, +1.24%) gaining 1.3% to 1,006 points. Traders are awaiting news on whether the Federal Reserve's historically loose monetary policy will continue.
The Fed's official statement is due at 2:15 p.m. Eastern. It will probably include a clear nod to the improved economic outlook, but few observers think the central bank will raise interest rates or abandon the easy-money policies that may have prevented a second depression. See Indications.
Crude supplies rise
Earlier in the session, September crude soared to an intraday high of $71.13 a barrel, but the contract pared its gains after the Energy Information Administration released supply data.
Crude supplies rose by 2.5 million barrels to stand at 352.0 million barrels during the week ended Aug. 7, the EIA said. The increase was higher than the 1.2 million barrels expected by analysts polled by Platts.
James Williams of WTRG Economics said it was another "bearish" report from the EIA as crude stocks are rising in a month when they normally decline.
"With OPEC cheating a little more every month, crude and product stocks exceptionally high with over 59 days supply, consumption of gasoline slightly below last year and consumption of everything else much lower, this report should be like honey to the bears," Williams said in emailed comments.
"The problem is whether the market will read the report or continue to trade on movements in equities and the dollar," he said.
Supplies at Cushing, Okla., the delivery point for Nymex crude futures, rose by 300,000 barrels last week to stand at 33.6 million barrels. That marked the seventh straight weekly increase at Cushing.
Gasoline stocks fell by 1 million barrels and distillate inventories rose by 800,000 barrels last week, the government also said. Analysts polled by Platts expected a decline in gasoline stocks of 1.7 million barrels as well as a rise in distillate stocks of 900,000 barrels.
