MW: Oil prices rally 3% to move back above $39 a barrel
Oil futures gained Tuesday, bouncing back after settling under $39 a barrel for the first time in 6 ½ years, as China’s decision to cut interest rates gave the market an extra boost.
Prices were already rising as U.S. and European markets surged, making up much of Monday’s rout.
The decision by the People’s Bank of China to cut interest rates and banks’ reserve requirement. The move underscored concerns about the slowdown in the world’s second-largest economy and major consumer of oil, but helped most global markets, including U.S. stocks, rebound.
West Texas Intermediate crude for October delivery CLV5, +3.27% climbed $1.29, or 3.4%, to $39.52 a barrel on the New York Mercantile Exchange. October Brent crude LCOV5, +2.18% on London’s ICE Futures exchange added 94 cents, or 2.2%, to $43.63 a barrel.
Data issued last week showing a rise in U.S. oil drilling rigs has helped drive crude’s fall in recent days, but some analysts say that can’t continue forever, with oil now under $40. That could temper some fears about oversupply.
As long as the price stays below the $40, it is likely that the rig count will drop, said Naeem Aslam, chief market analyst at AvaTrade, in a note Tuesday. “This will dent the U.S. shale-oil supply, and crude oil could see a bounce on the back of this in the next quarter or so.”
On Monday, WTI settled down 5.5% at $38.24 a barrel, the lowest level for a most-active contract since February 2009, as traders fretted over the prospects for global economic growth and energy demand.
U.S. economic data Tuesday was upbeat, a reading on August consumer confidence rising to its highest level since January.
Traders will look to this week’s supply data for guidance on oil’s outlook. The American Petroleum Institute will release its petroleum supply report late Tuesday, while the U.S. Energy Information Administration’s data come out Wednesday. Analysts polled by Platts forecast an increase of 1.9 million barrels in crude inventories.
On Nymex, September gasoline RBU5, -1.43% was down 1.6 cents, or 1.1%, to $1.455 a gallon, while September heating oil HOU5, +1.39% traded at $1.414 a gallon, up 2.2 cents, or 1.6%.
Read: $2 gas? It’s already happening in 12 states
September natural gas NGU15, +1.09% tacked on 2.7 cents, or 1%, to $2.677 per million British thermal units.
Oil and natural-gas traders kept watch on newly formed tropical storm Erika in the Atlantic for any risk of production to the Gulf of Mexico.
Speculation over calls for an emergency Organization of the Petroleum Exporting Countries emerged Monday. Analysts have said that an OPEC cut in production would help stabilize the market, but Thomas Pugh, commodities economist at Capital Economics, said in a note Tuesday that OPEC is likely to “remain steadfast in its policy of maintaining high output.”
