By Timothy Puko
Oil prices rallied to small gains on Wednesday after data
showing a decline in the number of working oil rigs and a stockpile
addition smaller than expected.
January crude closed up 17 cents, or 0.4%, higher to $43.04 a
barrel on the New York Mercantile Exchange. Nymex oil had dipped as
low as $41.72--losses of about 2%--in early trading.
Brent, the global benchmark, rose 5 cents, or 0.1%, to $46.17 a
barrel on ICE Futures Europe. Brent has now rallied for
six-straight sessions, its longest winning streak since April and
up 6% during that span.
Oil prices rebounded into positive territory just after 1 p.m.
when oil-service company Baker Hughes Inc. reported the U.S.
oil-rig count fell by nine in the most recent week, extending the
drop reported a week earlier. The number of active U.S.
oil-drilling rigs, viewed by some as a signal about trends in oil
production, is down to 555, which is 54% lower than the peak in
October 2014. It has fallen in 12 of the past 13 weeks.
"The whole market seems to be trying to recover before the
holiday," said Peter Donovan, broker for Liquidity Energy in New
York. "The rig count number certainly helped more."
Prices had been on the rebound since the U.S. Energy Information
Administration said crude-oil inventories rose by one million
barrels last week. That was about in line with analysts'
expectations for a 1.1-million-barrel increase, but fell far short
of the 2.6-million-barrel increase reported by industry group
American Petroleum Institute. The API report had led to selling
overnight and into the morning, brokers said.
"There's a real fear out there of another repeat of last year
when you had a stock build in December," a time of year when
stockpiles usually fall, said Scott Shelton, a broker at ICAP PLC.
"People are nervous about it, but this report will give bulls some
comfort that we'll see something a little more seasonal."
At 488.2 million barrels, U.S. crude oil inventories remain near
levels not seen for this time of the year in at least 80 years.
Despite the slight rebound, the heavy surplus is still bearish, and
traders largely recognize the glut, said Tim Evans, analyst at Citi
Futures Perspective in New York.
"There's some sense that the petroleum inventory data could have
been worse," Mr. Evans said. "But there's really nothing within the
data for last week that's really supportive."
Gasoline stockpiles also grew by 2.5 million barrels, compared
with analysts' expectations for a 500,000-barrel increase. And
distillates, which include heating oil and diesel, grew by one
million barrels, compared with analysts' expectations for a
500,000-barrel decline.
The rally in oil helped pull both markets up despite the
unexpectedly large additions that originally sent the markets
lower. Gasoline futures settled up 0.59 cent, or 0.4%, at $1.3961 a
gallon, posting its sixth-straight winning session, up 13% during
that span. Diesel futures rose 0.3 cent, or 0.2%, to $1.4027 a
gallon.
Analysts and brokers have been talking down the market all
morning, calling Tuesday's gains an overshoot from the downing of a
Russian military jet along the border between Syria and Turkey. The
trouble in the world's most prolific oil-producing region caused
oil prices to rally close to 3%, but many say it is less important
because oil supply is so strong around the world.
"We saw a three-session rally because of rising geopolitical
tension, but that rally was snapped when investors reminded
themselves of the fundamentals which are very bearish at the
moment, based on oversupply," said Kash Kamal, a senior analyst at
Sucden Financial in London.
President Vladimir Putin accused Turkey of a "stab in the back"
and of aiding terrorists. The Kremlin stressed that he wasn't
suggesting that Moscow would respond with any military action.
The market is also turning its attention to the meeting of the
Organization of the Petroleum Exporting Countries on Dec. 4 in
Vienna. Most analysts say the oil-producer group is likely to stick
to its strategy of pumping crude at a high pace to defend its
market share.
Comments from Saudi Arabia, OPEC's most influential member,
indicated a willingness to cooperate with other exporters in
supporting the oil market, but analysts remain skeptical.
"The odds of a significant grouping of non-OPEC producers,
including Russia, emerging with a plausible set of production cuts,
along with Iran and possibly Iraq, remain very small," said Seth
Kleinman of Citi Research. "[We] continue to expect nothing of
significance from next week's OPEC meeting."
Neanda Salvaterra, Georgi Kantchev and Lisa Beilfuss contributed
to this article.
Write to Timothy Puko at tim.puko@wsj.com
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(END) Dow Jones Newswires
November 25, 2015 15:52 ET (20:52 GMT)
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