MW: Crude oil builds on gains, but off day’s high
By Victor Reklaitis and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) — Oil futures edged higher on Thursday, a day after prices soared on a supply drop and a surprise move by the Federal Reserve to keep its bond-buying program intact.
Natural gas also rallied ahead of weekly supply data due later Thursday.
October crude oil CLV3 +0.26% was last up 35 cents, or 0.3%, to $108.42 a barrel. The contract had traded as high as $108.99 earlier Thursday, according to FactSet data. On Wednesday, prices jumped 2.5% to settle at $108.07 a barrel on the New York Mercantile Exchange.
Data from the U.S. Energy Information Administration Wednesday said crude stockpiles for the week ended Sept. 13 fell 4.4 million barrels, which far exceeded expectations for a fall of 1.5 million barrels from Platts.
Oil futures are also rising after the Fed decided against tapering its $85-billion-a-month in bond purchases, with Fed Chairman Ben Bernanke saying that economic data since June did not support a reduction.
“The Fed decision to refrain from tapering at the September FOMC meeting is expected to have its biggest impact on crude-oil-market balances over [the first half of] next year, in our view,” Miswin Mahesh, oil analyst at Barclays, wrote in a research note on Thursday.
“The window for emerging-market oil demand growth to surprise to the upside is now open, as the current constraint for these countries—high import cost—fades and prospects for domestic consumption improve.”
Mahesh said oil prices should remain at current levels with an upward bias in September and the fourth quarter, with supply-side shortfalls and a moderated level of demand from non-Organization for Economic Cooperation and Development countries supporting a tighter market balance.
OECD crude inventories have been drawn down below their seasonal range and on the producer front, holders of spare capacity have been stretching their output to balance out the market.
“So news of Fed refraining from tapering comes at the same time as relatively low spare capacity and relatively low crude [and product] stocks,” said Mahesh.
He’s sticking to expectations that Brent crude prices will average $110 a barrel in 2014. November Brent crude UK:LCOX3 -0.31% , the European benchmark, dipped 27 cents, or 0.2%, to $110.33 a barrel on Thursday.
Natural gas advanced ahead of weekly supply data from the EIA due at 10:30 a.m. Thursday. October natural gas NGV13 +0.40% rose 3 cents, or 0.8%, to $3.74 per million British thermal units.
The EIA is seen reporting a net addition to natural-gas storage between 55 billion cubic feet and 59 Bcf for the week ended Sept. 13, according to a Platts survey of analysts.
The natural-gas storage report may indicate “whether this week’s attempt to launch a seasonal rebound ahead of heating season has come too early,” said Colin Cieszynski, senior analyst at CMC Markets, in a note.
In economic news, initial weekly jobless claims were lower than expected, with oil strengthening slightly after that report. Investors also are waiting for fresh readings on existing-home sales and business conditions in the Philadelphia Federal Reserve district.
Elsewhere in the energy complex, October gasoline RBV3 +0.06% rose 1 cent to $2.75 a gallon, and October heating oil HOV3 +0.15% was up 1 cent to $3.05 a gallon.
Victor Reklaitis is a New York-based markets writer for MarketWatch. Follow him on Twitter @VicRek.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @MWBarbaraKollmeyer.
