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MARKET PREVIEW: NYMEX Oil Futures Extend Gains Overnight
NEW YORK (DTN) — New York Mercantile Exchange oil futures rose in overnight electronic business, with the newly minted spot-month crude contract, September delivery, rising to a three-week high above $78 bbl, on falling crude supplies, rising equities and strong corporate earnings reports that limited pressure from a stronger U.S. dollar.
The pre-market gains early Wednesday stretches a rally from Tuesday when oil and equity markets rebounded in late trade, aided by rumors of refinery glitches, concerns about a strengthening tropical storm in the Caribbean and expectations for a drop in crude inventories.
On the fundamentals, the American Petroleum Institute reported a drawdown of 241,000 bbl in crude oil stocks, a drawdown of 412,000 bbl in gasoline and a build of 979,000 bbl in distillate fuels for the week-ended July 16. Implied distillate demand came in at 4.399 million bpd and implied gasoline demand was 9.332 million bpd, which are both respectable figures, according to Peter Beutel, president of Cameron Hanover in New Canaan, Conn .
The API data came within analysts’ expectations for crude and gasoline, although distillate figures were bullish compared to expectations. Traders are now awaiting more comprehensive inventory data from the Energy Information Administration due today at 10:30 AM ET.
U.S. stock futures rose overnight after Apple Inc.’s earnings came in above Wall Street expectations. Oil futures have lately been tracking equities and the dollar, with some strong corporate earnings often boosting investor sentiment.
U.S. economic data have been dismal in recent days, exacerbating talk of a possible double-dip recession. So, the market is eagerly awaiting a testimony later today by Federal Reserve Chairman Ben Bernanke before the Senate Banking Committee. Speculations the Fed could further cut interest rates by 25 basis points to zero to spur lending boosted markets yesterday, but some analysts think that’s unlikely to happen.
Weather is also becoming an issue of concern for the U.S. oil industry after the National Hurricane Center this morning upgraded to 70 percent the chance of a tropical cyclone formation near the Dominican Republic and extending northward over the Atlantic. This is going to be a busy hurricane season in the Atlantic, the National Oceanic and Atmospheric Administration has said.
The Gulf of Mexico accounts for nearly a third of U.S. oil output and is home to seven of the nation’s 10 busiest ports. States along the Gulf are home to a majority of the nation’s operable U.S. refining capacity.
Oil prices are also enjoying technical support, which is partly why the prices remain resilient in the face of bad economic news over the past couple of days, said Beutel.
At 8:00 AM ET on Wednesday, September NYMEX WTI crude futures were up 55cts at $78.13 bbl, after posting at three-week high of $78.25 in overnight trade. On a technical basis, the short-term trend remains up as the spot-month crude contract moves toward longer-term resistance at $78.40 and $79.59, prices that mark the 61.8 and 67 percent retracement levels of the downtrend from the May high of $87.15 through the low of $64.24.
On London’s ICE Futures, September Brent futures were up 64cts at $76.86 bbl, after an earlier trade at $76.99. The WTI/Brent arbitrage at $1.27 bbl is still below the roughly $1.50 level needed to cover trans-Atlantic shipping costs.
In products trade, August NYMEX No. 2 heating oil futures rose 1.43cts to $2.0390 gal after peaking earlier at $2.0427, which is still off Monday’s three-week high at $2.0644. Technically, the short-term uptrend endures with resistance between $2.0330 and $2.08, prices that mark the 50 percent and 67 percent retracement levels, respectively, of the previous minor downtrend from $2.1725 through the recent low of $1.8968.
August NYMEX RBOB gasoline futures increased 2.04cts to $2.0990, which is still down from Monday’s three-week high at $2.1000. Technically, the short-term uptrend remains intact with resistance between $2.0705 and $2.1122, prices that mark the 50 percent and 67 percent retracement levels, respectively, of the previous minor downtrend from $2.1930 through the recent low of $1.9480.
