OIL FUTURES: Oil Adds To Gains, Following Stocks Higher
April 05 2012 - 11:47AM
Dow Jones News
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;
christian.berthelsen@dowjones.com