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Oil futures end sharply higher after big drop in gasoline inventories

  • SOURCE: | Editor
  • poil ghaOil futures ended sharply higher Wednesday, taking back a chunk of this week’s hefty losses after an unexpectedly large drop in gasoline inventories.

    On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU6, +1.10% jumped $1.32, or 3.3%, to settle at $40.83 a barrel. The U.S. benchmark initially dived, erasing early gains, after weekly inventory data from the Energy Information Administration showed a surprise 1.4 million barrel rise in crude inventories last week.

    Crude almost immediately bounced back, however, hitting new session highs as traders focused on a larger-than-expected 3.3 million barrel drawdown in gasoline inventories and a 1.1 million barrel fall in crude inventories at Cushing, Okla., the delivery point for Nymex futures, analysts said.
    “The mantra [going into the report] was that we have this glut of products, so the drop in gasoline inventories” changed the complexion, said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

    A Wall Street Journal survey of analysts showed the EIA was expected to report that crude stocks declined by 900,000 barrels. Gasoline stockpiles were expected to show a decrease of 300,000 barrels.

    See: Why oil bears shouldn’t count on U.S. shale rebound

    October Brent crude LCOV6, +1.00% on London’s ICE Futures exchange rose $1.30, or 3.1%, to $43.10 a barrel.

    Week to date, U.S. oil prices remain down 1.7% amid concerns about a global glut.

    Flynn said near-term market momentum remains bearish and that it would likely take a close above $41 a barrel to inspire further short covering and encourage a further bounce. Failure to hold $40 a barrel, however, could inspire a run toward $38, he said.

    “I can give you reasons why I don’t think oil prices are going to collapse…but the momentum is very weak,” he said.

    Bearish traders are targeting $35 a barrel.

    Anticipated production pickups in Nigeria and Libya, where politically related supply disruptions are being resolved, will also keep the world swamped in surplus barrels, they say.

    Nymex reformulated gasoline blendstock for September RBU6, +0.54% —the benchmark gasoline contract—rose 3.83 cents, or 2.9%, to end at $1.3499 a gallon. September heating oil HOU6, +0.99% futures gained 2.85 cents, or 2.3%, to finish at $1.3474 a gallon.

    Natural gas for September delivery NGU16, -0.35% rose 10.6 cents, or 3.9%, settling at $2.839 per million British thermal units.

    Source:http://www.marketwatch.com/story/oil-prices-gain-on-hopes-us-crude-supplies-will-reveal-a-drawdown-2016-08-03

     

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