OIL PRICES: ABOVE $47 YET
According to WSJ, oil prices continued their rise Thursday, pushed higher by the previous day's surprise drop in U.S. inventory levels and the weakening U.S. dollar.
U.S. oil for November delivery rose 98 cents, or 2.16%, to $46.32 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 82 cents, or 1.99%, to $47.65 on ICE Futures Europe.
"Coming into the day we continued to receive support from the large unexpected draw. Once the dollar sold off, that added to the market," said Gene McGillian, research manager at Tradition Energy.
The U.S. dollar weakened slightly on Thursday, following the Federal Reserve's decision to leave short term interest rates unchanged. That helped make oil, priced in dollars, more affordable to buyers who use foreign currencies. The WSJ Dollar Index recently fell 0.06%.
But the boost could be short lived, Mr. McGillian said. Market participants may soon begin to contemplate a potential interest-rate increase later this year. And despite the surprise 6.2 million barrel drawdown that the U.S. Energy Information Administration reported Wednesday, domestic crude stockpiles are still 11% above year ago levels.
"Until we really see signs that the overhang in inventory levels is going away, the market is going to have trouble sustaining moves like this," Mr. McGillian said.
Analysts were still puzzled Thursday about what drove U.S. crude supplies lower. Germany's Commerzbank said in a note that there was no clear indicator as to why stocks had fallen again and that the drop shouldn't be read as a signal that supply will tighten anytime soon.
Analysts say the global market remains oversupplied. Production from the Organization of the Petroleum Exporting Countries has grown in recent months owing to record Saudi Arabian production and more coming from Iraq and Iran. In addition, Libya has resumed exports from a long closed port.
Market observers are also weighing the likelihood that members of the Organization of the Petroleum Exporting Countries will reach an agreement on capping output when they hold informal talks next week. An official said Thursday that Iraq would support a decision by the cartel to limit oil output to prop up petroleum prices. But many market watchers remain skeptical of any real action given the longstanding tensions within the group.
"Those who are banking on OPEC to cut or freeze production really should stop dreaming," a Chinese fuel-oil trader based in Singapore said.
Colonial Pipeline Co. said Wednesday evening that it had restarted its main gasoline line, which had been partially shut down since the discovery of a massive leak in Alabama on Sept. 9. The outage had choked off fuel supplies to much of the Southeast and pushed gasoline prices at the pump higher. The company has said it could still take several days for supply chains to return to normal.
Gasoline futures were roughly flat, up 0.28 cents, or 0.2%, to $1.4018 a gallon. Diesel futures rose 2.52 cents, or 1.76%, to $1.4542.
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