PT: Crude Oil Bouncing Around $70 As US Gasoline Demand Increases
This morning’s oil trading on London’s Intercontinental Exchange (ICE) saw European investors catch up following a particularly volatile North American session. West Texas Intermediary (WTI) crude futures are bouncing around the $70 level after revisiting the overnight highs, reaching $70.40.
Wednesday’s early rally was supported initially by the improved US GDP data, which fell at a shallower pace prompting some economist to claim that America is emerging out of its recession. However the day’s early optimism faltered as the afternoon progressed, with Chicago’s Institute of Supply Management survey revealed that it’s Purchasing Managers’ index (PMI) unexpectedly fell sharply in September.
The economic report is among the key indicators relative to US industrial production. Today’s announcement is suggesting that American companies may limit output and inter-business spending in the coming months.
Crude prices pulled back sharply to around $66.70 until the weekly report from US Department of Energy (DoE) prompted crude prices to spike above $70. The DoE announced an unexpected decline in gasoline inventories. The report also highlighted that gasoline demand had grown over 5% in comparison to the same period last year.
Despite the apparently bullish implications, generally crude oil and distillate stockpiles are still considerably high by historic measures. The report indicated that crude oil stockpiles rose by almost 800,000 barrels last week standing at 211.5m barrels.
Elsewhere reports from more cynical market commentators suggest that the end of the calendar month had more of an impact on the spiking oil price than the DoE report. Some reports cite trader ‘window dressing’ using the inventory report as a trigger. Analysts pointed to the last minute surge in the Nymex crude price, which rose over 40 cents in the last three minutes of trading as an attempt to put a shine on quarterly performance statistics.
Crude Oil investors will undoubtedly focus on the relative volatility of the up-coming sessions in an attempt to cut through the speculation. It is clear however that the key driver of the oil market right now is the US consumption outlook.
The remainder of the week still has several key economic reports scheduled which are likely to clarify America’s ongoing recovery and reveal the potential consumption outlook. The most eagerly anticipated report will be Friday’s monthly Jobless Report from the US Department of Labour.
In London, UK listed Oil and Gas equities were marginally weaker. Among the tier one oil & gas stocks Cairn Energy (LSE: CNE) were the worst effected dropping almost 2% to trade at £27.38. British Petroleum (LSE: BP.) and BG Group (LSE: BG.) lost half a percent. Royal Dutch Shell (LSE: RDSB) were relatively unchanged.
Irish producer Tullow Oil (LSE: TLW) was the strongest performing Oil & Gas major moving in the opposite, rising over 1%.
In the FTSE 250, Dragon Oil (LSE: DGO) and Dana Petroleum (LSE: DNX) both were in decline, shedding 1.2% and 2% respectively. Heritage Oil (LSE: HOIL) managed to stay on positive ground with a small gain.
Most juniors rose in early trade. Enegi Oil (LSE: ENEG) hiked over 30% after saying it would resume production from a previously shut-in well at the Garden Hill South prospect. Energy investor Xract Energy (LSE: XTR) also did well, adding 7%.
EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG), Kazakhstan operating Max Petroleum (LSE: MXP) and North American based explorer Nighthawk Energy (AIM: HAWK) all added more than 2%.
Ukraine focused gas producer, Regal Petroleum (AIM: RPT) was the leading faller among the small caps, losing over 10% following a drilling update from Ukraine. Iraq and Algeria operating Gulf Keystone Petroleum (AIM: GKP) and North American focused oil & Gas junior, Pantheon Resources (AIM: PANR) also were in decline, shedding over 2%.
