Oil futures rallied Thursday on the heels of a U.S. stock-market climb, with U.S. prices rebounding from more than six year lows earlier this week to trade above $40 a barrel.
Prices also saw support a day after data showed a decline in weekly U.S. crude inventories.
West Texas Intermediate crude for delivery in October CLV5, +8.21% traded at $40.97 a barrel, up $2.37, or 6.2%, on the New York Mercantile Exchange after posting a decline of 1.8% in the previous session. Prices haven’t closed at a level this high in about a week.
October Brent crude LCOV5, +7.46% on London’s ICE Futures exchange rose $2.57, or 6%, to $45.71 a barrel.
Investor sentiment was shored up as upbeat U.S. economic data helped fuel a strong climb in the Dow industrials DJIA, +1.80% Thursday. In China, the Shanghai Composite Index SHCOMP, +5.34% also rallied by 5.3% to end a five-day losing streak.
Read: Asian markets rebound, boosted by central banks, U.S. data
“The crude complex is getting swept up in this optimism and indulging in a decent rally, even though fundamentals remain soft—a view affirmed by yesterday’s EIA data,” said Matt Smith, director of commodity research at ClipperData.
The Energy Information Administration reported Wednesday that U.S. supplies of crude fell more than expected for the week ended Aug. 21, but gasoline inventories rose, contrary to some forecasts for a decline.
U.S. economic data released Thursday provided support for U.S. equities and buoyed prospects for an uptick in energy demand. Weekly jobless claims fell, marking the first decline in five weeks. A reading on second-quarter gross domestic product, meanwhile, showed that the U.S. economy grew at a faster 3.7% annual pace, up from an initial estimate of growth at a 2.3% clip.
But 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. As of last week, oil supplies totaled 450.8 million barrels.
“Considering the volatility we have seen over the past few days, prices seem to be stabilizing at this level,” said analyst Daniel Ang at Phillip Futures. However, he 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.
On Nymex, petroleum-product prices followed suit with the rally in oil. September gasoline RBU5, +6.12% jumped 7.9 cents, or 5.8%, to $1.434 a gallon, rebounding from a 5.8% drop a day earlier, while September heating oil HOU5, +6.66% added 8.1 cents, or 5.9%, to $1.462 a gallon.
On its expiration day, the September contract for natural gas NGU15, -0.33% traded at $2.666 per million British thermal units, down 2.7 cents, or 1%, following weekly supply data. October natural gas will become the front-month contract at the settlement. It NGV15, -0.22% was down 2 cents, or 0.7%, at $2.683 per million BTUs.
The EIA reported Thursday that supplies of natural gas rose by 69 billion cubic feet for the week ended Aug. 21. Analysts polled by Platts had forecast a climb of between 58 billion cubic feet and 62 billion cubic feet.
