MW: Oil swerves in and out of the red after Philly Fed
Prices traded firmly lower earlier
By Claudia Assis and Laura Mandaro, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures seesawed between small gains and losses Thursday, as investors digested a slight improvement in manufacturing in the Philadelphia area as well as lackluster global macroeconomic data.
Crude for October delivery CLV2 -0.12% slipped 16 cents, or 0.2%, to $91.82 a barrel on the New York Mercantile Exchange.
Prices dropped sharply during European trading hours, but pared some of those losses. The Philadelphia Federal Reserve showed a slight improvement in manufacturing in the region, with the bank’s business-conditions index rising to -1.9 from -7.1 in August.
Oil’s October contract expires Thursday. The tentative trading comes in the wake of a 3.5% tumble Wednesday, with oil finishing at a six-week low. At current prices, front-month crude-oil futures have fallen a bit more than 7% this week. Read Market Extra on what’s behind oil’s steep fall this week.
Traders also digested preliminary manufacturing data from Europe and China, and jobs data from the U.S.
The U.S. Labor Department said applications for jobless benefits fell by 3,000 to a seasonally adjusted 382,000 in the week ended Sept. 15. Economists polled by MarketWatch had expected a drop to 375,000. See: Jobless claims show little improvement
Preliminary data from HSBC on Chinese manufacturing conditions in September showed a drop in activity for the 11th straight month.
The HSBC “flash” purchasing managers’ Index for the world’s second-largest economy printed at 47.8, below the 50-point threshold that separates expansion and contraction, but this was up slightly from a final reading of 47.6 in August. Read full story on China PMI.
“The extended losses are hinting more and more that the bullish impact of [the third round of quantitative easing] had already been priced into the market for several weeks and that the focus is now on weaker global economic growth indicators,” wrote JBC Energy GmbH in a note.
Also on Thursday, Markit said its flash manufacturing purchasing managers’ index for the U.S. remained at 51.5 in September.
Markit earlier reported euro-zone flash manufacturing PMI rose to 46.0 from 45.1 in August. Readings below 50 indicate a contraction.
Oil futures and equities, two asset classes closely linked to global growth expectations, have been rallying since early August, in part due to anticipation that a sluggish global recovery would spur major developed economies’ central banks to add more money to the financial system. The Federal Reserve announced its third round of quantitative easing, or QE3, earlier this month.
Inventories, Saudi offer of supply
The sharp declines in crude prices Wednesday came as official data released by the Energy Information Administration showed U.S. inventories jumped 8.5 million barrels in the week ended Sept. 14, trouncing expectations for a 2.5 million-barrel increase.
Tim Evans,energy analyst at Citi Futures, said Wednesday’s steep fall in oil futures, which defied a rise on Wall Street, came as “money managers cut long positions in tacit recognition that the oil market has its own fundamentals, including ample current supplies.”
Also, a Financial Times report saying Saudi Arabia, the world’s largest petroleum exporter, has offered customers in the U.S., Europe and Asia extra oil supplies to offset rising prices weighed on the commodity.
In other energy trading Thursday, gasoline for October delivery RBV2 +1.87% rose 5 cents to $2.88 a gallon. Heating oil for delivery in the same month HOV2 +0.99% added 2 cents to $3.07 a gallon.
Natural gas for October delivery NGV12 +1.23% gained 5 cents at $2.81 per million British thermal units, ahead of weekly U.S. gas-in-storage data.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Laura Mandaro is a MarketWatch editor, based in San Francisco. Barbara Kollmeyer in Madrid contributed to this report.
