Crude-oil futures got a reprieve Thursday, erasing overnight losses to rise 2% in Asian trade as stock markets across the region made solid gains.
Oil prices were also supported by a decline in weekly U.S. oil inventories and some amount of bargain hunting after falling to more than six-year lows earlier this week.
Investor sentiment was shored up after the Dow industrials DJIA, +3.95% rallied on Wednesday’s close, followed by a rebound in most Asian stock markets and commodities. The Shanghai Composite Index SHCOMP, +5.34% was last higher by around 2%.
Read: Asian markets rebound, boosted by central banks, U.S. data
On the New York Mercantile Exchange, light, sweet crude futures for delivery in October CLV5, +3.01% traded at $39.62 a barrel, up $1.02, or 2.6%, in the Globex electronic session. October Brent crude LCOV5, +2.88% on London’s ICE Futures exchange rose $1.09, or 2.5%, t0 to $44.14 a barrel.
“Considering the volatility we have seen over the past few days, prices seem to be stabilizing at this level,” analyst Daniel Ang at Phillip Futures said. He, however, said the bearish momentum can’t be underestimated and still believes that it is possible for WTI and Brent crude to break below technical support levels of $38 a barrel and $45 a barrel, respectively.
Citi Futures said Brent crude has gathered strong support at the $40 a barrel psychological mark. The Brent contract for October delivery has a chance of establishing a temporary bottom at Monday’s low of $42.23 a barrel, although it has fallen so much that another small drop wouldn’t spoil the chance for an upward correction, analyst Tim Evans at Citi Futures said.
On Wednesday, the U.S. Energy Information Administration said weekly commercial crude oil stocks fell by 5.45 million barrels, which is supportive for oil prices.
However, high petroleum product inventories and a seasonal post-summer decline in refinery demand is a potential drag for oil prices in coming months. “U.S. crude oil inventories are likely to hit new highs in [the fourth quarter of] 2015, and again throughout 2016 until something gives,” Citi Research said in a report.
It said U.S. oil stockpiles could breach 500 million barrels in October as oil production remains steady, and ample global supply means that surplus oil barrels look for homes in U.S. onshore storage and floating storage.
“However, volatility indices remain elevated across all asset classes, particularly in equities, a clear indication that uncertainty lingers,” Societe Generale said, adding that crude prices may continue to take their cue from financial market volatility.
Nymex reformulated gasoline blendstock for September RBU5, +3.48% — the benchmark gasoline contract — rose 279 points to $1.3828 a gallon, while September diesel traded at $1.4042, 233 points higher.
ICE gasoil for September changed hands at $428.75 a metric ton, up $4.00 from Wednesday’s settlement.
