Crude futures turned strongly positive in mid-morning trading Thursday, rising in tandem with stocks and other risk assets as markets shook off European gloom to focus on more encouraging U.S. data.
Light, sweet crude for May delivery was up $1.34, or 1.3%, at $102.81 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange reversed earlier losses and was up 58 cents, or 0.5%, at $122.92 a barrel.
The Labor Department said initial jobless claims fell to the lowest level in four years last week, decreasing by 6,000 to 357,000. The result was better than the 360,000 claims expected by analysts.
Equity markets, which had been trending lower on Spanish debt worries and discouraging European economic data, reversed course and headed higher. Oil futures followed close behind.
"When people step back and look away from European debt headlines, the picture in the U.S. economy is still grounds for optimism," said Jaya Bajpai, managing director of Trajan Investment Management in Rockville, Md. "On a fundamental basis there's still plenty of crude and products, so I think this is much more a combination of short-covering, profit-taking and adding a little bit to risk positions."
Rhetoric between Iran and the West has propped up crude prices most of the year so far, but as it has cooled the market has begun refocusing on growing supplies in the U.S. and falling demand. Government data released Wednesday showed U.S. oil stockpiles rose by 9 million barrels, the largest weekly increase in more than three years and the highest inventory level since last June. Analysts expected a 1.9-million-barrel rise. The data showed inventories are growing as U.S. production surged 7% over year-ago levels and implied demand fell 4.7%. Futures on Wednesday settled at their lowest level since Feb. 14, after trading at a recent high above $110 a barrel last month.
Many traders and analysts believe crude futures are poised to fall further.
"The complex is beginning to break down under the pressure of mounting U.S. crude supplies, reduced appeal for oil futures as an asset class, a declining euro and an Iranian risk premium that is looking fully priced," advisory firm Ritterbusch and Associates said in a note. "With fundamental and technical factors now aligned, a violation of the $100 mark is looking highly likely with an ultimate move down toward the $94-95 area expected."
Other factors are also weighing on the market. Western nations have recently discussed releases from strategic petroleum reserves to tame market prices, and Fed minutes released Tuesday showed another round of monetary stimulus, which typically spurs commodity markets higher, appears unlikely.
Front-month May reformulated gasoline blendstock, or RBOB, recently traded down 1.12 cents to $3.3224 a gallon. May heating oil was up 0.11 cent at $3.1620 a gallon.
-By Christian Berthelsen, Dow Jones Newswires; 212-416-2381; [email protected]