EG: OIL FUTURES: Crude Oil Bounces Back After Tuesday Selloff
By John M. Biers
Crude oil futures prices bounced back Wednesday after Tuesday's selloff and in anticipation of the release of U.S. oil inventories later in the day.
Front-month light sweet crude oil futures on the New York Mercantile Exchange for August delivery were up 1.2%, or $1.01, to $84.92 a barrel.
The jump followed a late-afternoon sell off Tuesday that was spurred by a variety of factors, including a drop in U.S. equities and the resolution to a Norwegian labor dispute that had threatened 2.2% of global oil supply.
Wednesday's rally is "primarily a recovery from yesterday," said Citi Futures Perspective analyst Tim Evans. Oil was "hit on the head yesterday, and it turned out it was only stunned. It was not rendered unconscious."
Analysts said the market was also anticipating the 10:30 a.m. release of new data from the U.S. Energy Information Administration. Crude oil inventories likely declined by an average 1.1 million barrels in the week ended July 6, according to a Dow Jones Newswires survey of 11 analysts. The American Petroleum Institute, an industry group, Tuesday forecast that inventories would decline by 695,000 barrels.
"We're bidding up on the inventories," said Carl Larry, an analyst with Oil Outlooks & Opinions, a research and consulting firm.
Recent economic indicators for industrial activity and jobs growth have been generally weak, a poor sign for the oil market, where demand growth is fueled by economic activity. On Tuesday, the U.S. Energy Information Administration trimmed its 2013 global oil demand growth forecast by 400,000 barrels a day to 700,000 barrels a day.
On the bullish side, there was fresh evidence Wednesday that Iran has lowered its output following recent sanctions in the U.S. and the European Union.
According to data OPEC analysts gathered from secondary sources, these restrictions drove Iran's oil production down by 188,500 barrels a day in June, to 2.96 million barrels a day. The last time Iran's annual average production fell below 3 million barrels a day was 1990.
Financial markets are also looking ahead to the release Wednesday evening of minutes from the June meeting of the Federal Open Market Committee, which could give an indication of further quantitative easing. Previous rounds of quantitative easing have helped bolster the oil price thanks to the weakening impact they have on the dollar.
Write to John Biers at john.biers@dowjones.com
--Sarah Kent and Summer Said contributed to this article.
