Oil prices eased slightly in early trading Thursday, with Brent holding near $102 levels amid corrective moves following the surge that we saw yesterday as a result of the dollar slide and news of a Ukraine deal with Russia.
The European benchmark dropped the past two session hitting a 16-month low before rising again on the back of news that the Kiev government has reached an agreement with Russia on a permanent ceasefire on the Donbass region. The news bolstered expectations of demand for oil in Europe.
Yesterday, President Poroshenko`s press office said in a statement that a "mutual understanding was achieved concerning the steps which will enable the establishment of peace."
The geopolitical tensions in Eastern Europe continue to support oil prices, especially Brent, while giving the dollar more space to rally as markets still fears further sanctions against Russia by the West and possible disruption despite the ample supplies around the world.
In the US, manufacturing continues to show strength with the ISM report showing some its best numbers of the recovery. The ISM surprisingly climbed the highest level since March 2011.
Also bolstering the outlook for demand, new orders for U.S. factory goods posted a record gain in July and auto sales last month accelerated to their highest level in 8-1/2 years, government data showed yesterday.
Yesterday, the API data showed fuel stocks rose by 362 thousand last week, compared with expectatiosn of a decline.
U.S. crude inventories are seen falling 1 million barrels in last week, according to a Bloomberg survey before today`s Energy Information Administration report, due at 15:00 GMT. It would be a third weekly decline.
The US Dollar Index was little changed around 82.91, compared with the previous close at 82.84.
On the jobs front, the ADP has been on a hot streak, accurately forecasting change in the employment report the last several months. The employment index of the ISM non-manufacturing report could also jostle expectations for Friday`s report. Jobless claims, however, will not affect expectations since the sample periods for today`s report will fall outside the sample period for Friday`s report.
If Friday`s employment report shows the same kind of strength as yesterday`s reports did, then expectations for Fed tightening will definitely be pulled forward.
As of 03:25 am ET
- West Texas Intermediate for delivery in October fell 0.81% to $94.76 a barrel on the New York Mercantile Exchange
- Brent for October delivery fell 0.61% to $102.14 a barrel on the ICE exchange in London