Oil Settles Above $72 on Surprise Drop in US Crude Supplies

By: Reuters | 19 Aug 2009 | 02:51 PM ET
Oil prices surged nearly 5 percent to settle above $72 Wednesday after U.S. government data showed a steep drop in crude imports and inventories in top consumer the United States.

U.S. crude stockpiles plunged by 8.4 million barrels in the week to Aug. 14 — against analysts' forecasts for a build — as imports dropped to the lowest level since September 2008 and refiners hiked runs, according to data released by the U.S. Energy Information Administration.

Gasoline inventories also showed a bigger-than-expected drop, while distillate stockpiles showed a surprise drop.

"The data is being viewed as bullish as all stock categories fell more than expected," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

The data helped push U.S. light, sweet crude [US@CL.1 72.23 3.04 (+4.39%)] up $3.23, or 4.67 percent, to settle at $72.42 a barrel. London Brent crude [GB@IB.1 74.37 2.00 (+2.76%)] rose $2.22 to settle at $74.59 a barrel.

"When WTI is so much weaker than Brent, it closes the arbitrage. Even ships that are already loaded up with crude can be rerouted to other markets where prices are looking more attractive," said Addison Armstrong, director of Research for Tradition Energy in Stamford, Connecticut.

Further the American Petroleum Institute (API) said U.S. oil demand in July showed signs of improvement, with demand down 3 percent year-on-year last month compared with an average drop of around 6 percent in the first half of 2009.

"I think these (demand) changes are reflective of an improving economy, but one must be cautious because these changes are versus year ago weak numbers," said API chief economist John Felmy.

Slumping demand due to the global economic crisis sent crude oil prices off record high prices near $150 a barrel hit in July 2008 to below $33 a barrel in December. Expectations for a potential rebound in the economy could increase fuel consumption and have helped lift prices.

Oil prices had fallen earlier on Wednesday, hitting a low of $68.05 after a near 5 percent slump in Chinese shares sent doubts rippling through global markets about the strength of the world economic recovery.

U.S. stocks rose as energy shares jumped following the EIA data, while the dollar fell.

Traders also watched for storms in the Atlantic Basin but there was no immediate threat seen to U.S. oil installations in the Gulf of Mexico.

Powerful Hurricane Bill, a dangerous Category 4 storm with 135 mph (215 kph) winds, raged across the open Atlantic on Wednesday, days from land but on a path that could menace Canada's eastern province next week.

Crude Oil May Climb to $95 in Early 2010: Technical Analysis

By Mark Shenk

Aug. 7 (Bloomberg) -- Crude oil may reach $95 a barrel by early next year after rising to a seven-week high this week, according to technical analysis by Auerbach Grayson.

Oil is set to reach $83 a barrel, which corresponds with the 38.2 percent Fibonacci retracement of the range generated by the September contract’s high of $145.96 on July 14, 2008, and the low of $44.28 touched on Feb. 18. The next target of $95 would be a 50 percent retracement.

“The oil market is in a strong position for a further move to the upside,” Richard Ross, a technical analyst at Auerbach Grayson, a brokerage in New York, said in a telephone interview. “There was a 70 percent pullback from the peak last summer to the trough. A 50 percent retracement brings you right to $95.”

Crude oil for September delivery fell 3 cents to $71.94 a barrel yesterday on the New York Mercantile Exchange. Futures topped $70 on Aug. 3 for the first time since July 1, which was a breakout from a ‘symmetrical triangle formation,’ Ross said.

“We were able to break out on the upside Monday and more significantly, we broke out and held those gains,” Ross said. “This shows the ability of the oil market, along with equities, to shrug off bad news and focus in the good news. This is a good sign for technicians.”

The Fibonacci sequence was identified by Italian mathematician Leonardo Fibonacci in the 13th century. The ratio between the numbers, about 0.618, is known as the golden mean, and is also used by technical analysts to find levels of resistance and support.

Oil Rises Above $71 on US, China Factory Output

By: Reuters | 03 Aug 2009 | 12:06 PM ET
Oil rose more than $1 after hitting a one-month high near $72 Monday as positive manufacturing data in the U.S. and China raised optimism for an economic recovery that could bolster energy demand.

U.S. light, sweet crude [US@CL.1 71.45 2.00 (+2.88%)] rose more than $1 to above $71 a barrel after earlier hitting $71.95, the highest since June 30. London Brent crude [GB@IB.1 73.67 1.97 (+2.75%)] also rose.

The U.S. manufacturing sector continued to shrink in July, but at a slower pace than in June and at a lesser rate than expected, according to figures released by the Institute for Supply management on Monday.

The July index of national factory activity rose to 48.9 from 44.8 in June, the highest reading since August 2008.

In China, a surge in domestic investment spurred factory activity, with Brokerage CLSA's China Purchasing Managers' Index (PMI) rising to a one-year high of 52.8 in July from 51.8 in June.

"The weak dollar and the manufacturing data are big boosts to the energy markets today"' said Phil Flynn, analyst at PFGBest Research, Chicago.

Oil Barrels

Analysts said a weak dollar, which slid to its lowest point this year on Monday against a basket of currencies amid increased risk appetite, would offer support to oil. Global shares were boosted by the news, with Wall Street opening higher and the S&P 500 Index advancing briefly above the 1,000 level to its highest level in 9 months.

European shares hit a new high for 2009, led by banks. The latest gain in oil prices brings oil within sight of the 2009 high of $73.38 set in June, though some see resistance that prices could struggle to rally beyond.

"I feel that the market has gathered so much momentum and crude may be overpriced at this point," Flynn said. On Friday, crude rallied almost 4 percent as data showed the U.S. economy shrank at a smaller-than-expected 1 percent annualized pace in the second quarter, raising hopes the recession was easing.

The market climbed about 2 percent last week — the third straight week of gains — which helped to reverse steep losses in the middle of the month and brought July's monthly decline to a marginal 0.6 percent.

China's crude stockpiles in June, including both state strategic and commercial reserves, declined 2.7 percent from a month earlier, the first fall in four months, China OGP, a newsletter run by Xinhua, reported.

Supply curbs by the Organization of the Petroleum Exporting Countries since last year in response to falling demand have helped crude rally from below $33 in December.

However, output from 11 members from the OPEC rose slightly in July, lowering its compliance rate to its agreed supply curb to 71 percent from 72 percent in June, a Reuters survey showed.