Oil prices were on a rise today on signs that the demand in the US is picking up.
The American Petroleum Institute (API) released an inventories report on Tuesday, revealing a surprisingly large drop of 2.4 million barrels.
API added that distillates, which include diesel and heating oil, decreased by 2.8 million barrels, while gasoline stocks added 3 million barrels.
A more closely watched report from Energy Information Administration (EIA) will be released tomorrow.
A Platts survey predicted crude oil inventories to add 2.2 million barrels.
Today’s update on Chinese manufacturing provided more support for commodities. HSBC (LON:HSBA) reported that its China PMI (purchasing managers index) rose from 51.9 to 52.9 in September, marking a second straight monthly industrial expansion.
On top of that, business confidence in Japan increased for the sixth month in a row, according to a survey conducted by the Bank of Japan.
The increases in crude oil futures came amid a quiet day in stock markets. The UK’s FTSE 100 and futures for the main stock market indexes in the US were unmoved.
Oil futures usually track movements in share prices, which serve as an indicator of the strength of the economy, impacting the outlook for energy demand.
However, the falling US inventories and the upbeat news from Asia provided enough of a boost to push the prices up, easing concerns over the waning demand from the world’s largest energy consumer.
November Brent Crude reached US$79.07/barrel, while US light, sweet crude for November delivery rose to US$76.44/barrel.
BP (LON:BP) led the blue chip oil producers with a 3% advance. Fellow supermajor Shell (LON:RDSB) posted a small loss, as did Cairn Energy (LON:CNE).
BG group (LON:BG) declined 1.3% and Tullow Oil (LON:TLW) was flat.
Amec (LON:AMEC) stood just above the opening level. Anothe roil and gas engineering firm, Petrofac (LON:PFC), lost 1.1%.
Midcaps weren’t very active today. Dana Petroleum (LON:DNX), Premier Oil (LON:PMO), Salamander Energy (LON:SMDR) and Soco International (LON:SIA) were little moved.
Dragon Oil (LON:DGO) moved into the negative with a 1.3% loss. Heritage Oil (LON:HOIL) declined marginally.
Melrose Resources (LON:MRS) and JKX Oil & Gas (LON:JKX) did better, rising 2% and 1.5% respectively.
Services companies Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) posted small losses.
US focused explorer and producer Caza Oil & Gas (LON:CAZA) and energy sector focused investor Xtract Energy (LON:XTR) were among the top performing juniors with gains of 16% and 8% respectively.
