LONDON—Oil futures rallied Wednesday morning after a choppy early session, lifted by the euro hitting intraday highs against the dollar.
News that the private-sector businesses in the U.S. laid off 10,000 workers in August, instead of adding 17,000 as expected, supported oil prices. The ADP employment report is seen as a precursor to Friday's nonfarm payrolls.
Next on the market's radar is the weekly oil inventory data from the U.S Department of Energy at 1430 GMT.
A poll of analysts see crude stocks rising by 800,000 barrels for the week ended Aug. 27, while gasoline stocks are expected to fall by 200,000 barrels, and distillate stocks to increase by 1.1 million barrels.
These predictions are at odds with data from the American Petroleum institute, a trade body, late Tuesday, which surprised the market by reporting crude stocks rose 4.1 million barrels last week. Distillate stocks fell 1.9 million barrels and gasoline stocks fell 600,000 barrels.
However, Eugen Weinberg, head of commodity research at Commerzbank, warned to take the API figures with a pinch of salt.
"There were inconsistencies in the data again though; crude oil imports posted a sharp fall, which should in itself have meant a reduction in stocks," said Weinberg.
Crude prices were initially firmer in the overnight session following the sell-off Tuesday, on news that Chinese manufacturing growth accelerated in August.
Poor euro-zone manufacturing growth figures, which slowed to its weakest pace in six months in August, at 0800 GMT then reversed the gains.
But the euro shook off the eurozone PMI figures to push close to $1.28, dragging oil price along with it.
At 1058 GMT, the front-month October Brent contract on London's ICE futures exchange is 86 cents higher at $75.50 a barrel.
The front-month October contract on the New York Mercantile Exchange, called West Texas Intermediate, is trading 55 cents higher at $72.47 a barrel.
Trade is average with around 35,000 changing lots so far in each of the benchmark crude contracts.
Meanwhile, the October/November WTI timespread continued to widen, pushing out another 11 cents to minus $1.73, amid concerns about the record high crude stockpiles in the U.S.
This should encourage traders to continue to store barrels at Cushing, which is the landlocked delivery point for WTI.
But the geographical constraints of the Oklahoma city fails to give an accurate impression of crude prices in the Gulf of Mexico, the largest oil hub in the U.S., where the premium for the grade Louisiana Light Sweet increased to $3.90 a barrel over WTI Tuesday compared with $2.20 a barrel Friday.
Hurricane Earl is on course to skirt the eastern seaboard of the U.S. over the next few days, which could hamper demand for gasoline.
"It is now an increasing risk that Earl will move along the east cost of the U.S. just as the U.S. is going to enjoy the Labour Day long weekend ahead," said Bjarne Schieldrop, an analyst at SEB Commodity Research.
The Nymex gasoline for October delivery is 1.66 cents higher at 187.40 cents a gallon, while the ICE's gasoil contract for September delivery is $2.75 lower at $638.50 a metric ton.
