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Oil Jumps Most in a Day Since June, Snapping Red Streak For Now

Commodities Sep 09, 2020 03:53PM ET
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By Barani Krishnan

Investing.com - Oil staged its strongest one-day rally in three months on Wednesday as buyers returned to a market pummeled since last week by worries of weak demand for fuel after the end of the U.S. summer driving season.

New York-traded West Texas Intermediate, the key indicator for U.S. crude, settled up $1.29, or 3.5%, at $38.05 per barrel. WTI fell 7.6% on Tuesday, extending last week’s 7.5%.

London-traded Brent crude, the global benchmark for oil, closed the New York trading session up $1.01, or 2.5%, at $40.79. Brent fell below the key $40 per barrel mark on Tuesday, losing 5.3% after last week’s 5.6% drop.

Euphoria clouded over oil market economics in the past four months more than convincing statistics about the impact of business reopenings from Covid-19 lockdowns. Further distorting the picture was the draw of 38 million barrels of crude over a six-week stretch by U.S. refiners who appeared to be running at full summer steam rather than to the restraints of consumers acting in any way but normal.

Tepid U.S. jobs recovery since July — despite unemployment returning to the single digits — and a resurgent dollar that’s anything but good for commodities capped crude in the low $40s. 

The floor finally came off the market last week after OPEC kingpin Saudi Arabia cut the selling price of its oil, ostensibly to preserve or widen its market share. The Saudi move came weeks after OPEC’s global producer alliance called OPEC+ said it was winding back production cuts observed since May. 

Those ominous actions were followed by U.S. refiners slashing their crude utilization by 5% in just a week, as the peak summer driving season drew to a close.  The return of the Dollar Index to its bullish 93-handle and the stocks rout on Wall Street completed a perfect storm for crude longs.

Wednesday’s rebound on WTI — 3.5% — however marked the largest one day percentage gain since June 5.

Investors will have to wait to see if the recovery continues or the red streak returns.

 

Oil Jumps Most in a Day Since June, Snapping Red Streak For Now
 

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Comments (2)
Allan De Guzman
Allan De Guzman Sep 09, 2020 6:23PM ET
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Fake pump again almost all stocks are gap down in the morning and flat but if index is red wow majority is totally red.
Robert Nchor
Robert Nchor Sep 09, 2020 4:10PM ET
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Oil Futures were up but most stock prices were red/flat. Makes no sense
 
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