Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

UPDATE 13-Oil rebounds with Wall Street as Fed soothes

CommoditiesAug 08, 2011 10:24PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

* Fed says economy weakened, to keep rates low for 2 yrs

* API data show big draw in crude oil stocks

* WTI/Brent spread hits record above $26 a barrel

* OPEC lowers demand rise view for 2011, 2012

* Coming up: U.S. EIA oil data (1430 GMT Tuesday) (Recasts, updates throughout)

By Robert Gibbons

NEW YORK, Aug 9 (Reuters) - Oil pulled out of its dive on Tuesday in volatile trading as the Federal Reserve promised to extend near-zero interest rates for two more years, fueling a late Wall Street rally and dollar slump.

Oil settled sharply lower immediately after the Fed statement, which failed to pledge more concrete measures to get the economy back on track, disappointing traders. But prices turned positive as traders saw low rates as reason for hope.

Industry data showing a shock 5.2 million barrel drop in U.S. crude oil inventories added impetus to oil's post-settlement rally, helping offset some of the economic gloom that pushed Brent as much as 15 percent lower in a week.

"The (Federal Reserve signaled) an extended period of diminished, if not negative, economic growth. This bodes poorly for demand, but may indicate additional easing measures, which we know from recent experience is supportive of asset prices, especially commodities," said John Kilduff, partner at Again Capital LLC in New York.

ICE Brent crude for September ended post-settlement trading up $1.76 at $105.50 a barrel. That was after it settled at $102.57, down $1.17, the lowest close since Feb. 18.

Brent bounced as high as $105.95 after falling $5 to $98.74, the lowest intraday price since Feb. 8.

U.S. September crude rallied to end post-settlement trading up 83 cents at $82.14 a barrel. It settled at $79.30, down $2.01, having reached $83.05 after falling to $75.71, the lowest since September 2010.

Oil prices had traded near parity prior to the Fed statement, having pulled out of deep losses after Wall Street stocks rebounded early in the day.

In a divided decision, the U.S. central bank also signaled that it was prepared to do more if necessary, noting that it still has tools available for spurring growth and will use them if necessary. But it made no commitment to purchase government debt in a third round of quantitative easing, or QE3. [ID:nN1E7780FW]

U.S. stocks rallied late after seesawing in reaction to the Fed statement after a two-week slide by equities. The S&P 500 posted its best day in more than two years. [ID:nN1E7781N2]

Amid the volatility, Brent's premium to U.S. crude jumped to $26.08, roaring past the previous record of $23.57 reached on July 14.

Trading volumes were strong, with Brent and U.S. crude trading more than 50 percent above their 30-day averages.

OPEC CUTS DEMAND GROWTH VIEW

Ahead of the Fed comments, OPEC and the U.S. Energy Information Administration cut demand growth forecasts for 2011 in separate monthly reports. [ID:nN1E7781JD]

OPEC's expected oil demand growth increase for 2011 was lowered by 150,000 barrels per day (bpd) from the previous report to 1.21 million bpd, while the view for 2012 was lowered only marginally, by 20,000 bpd to 1.30 million bpd.

The EIA cut its 2011 demand growth forecast by 60,000 bpd but raised its 2012 forecast.

High prices helped push U.S. retail gasoline demand down last week versus the previous week and the year-ago period, MasterCard said in its report on Tuesday. [ID:nEGE7DB028]

A weakening demand picture could bolster the view of Iran and other OPEC price hawks, who at a meeting in June blocked a Saudi Arabia-led proposal to increase output.

"What investors are worried about is what happens to the global economy and the currency markets. But consumption will certainly be affected should the U.S. go into recession again," said Bill O'Grady, chief investment strategist at Confluence Investment Management in St. Louis.

U.S. OIL INVENTORIES

U.S. crude oil stockpiles fell 5.2 million barrels last week, the industry group American Petroleum said late on Tuesday, against a forecast for stocks to be down. [API/S]

Gasoline stocks fell 1.0 million barrels and distillate inventories fell 558,000 barrels, the API said.

U.S. crude stocks were estimated to be up 1.5 million barrels, according to a Reuters survey of analysts ahead of the API report. [EIA/S]

Distillate stocks were expected to be up 1.1 million barrels and gasoline inventories up 500,000 barrels.

The government report from the EIA will follow on Wednesday at 10:30 a.m. EDT (1430 GMT). (Additional reporting by Gene Ramos in New York, Simon Falush in London and Alejandro Barbajosa in Singapore; Editing by David Gregorio, Sofina Mirza-Reid and Dale Hudson)

UPDATE 13-Oil rebounds with Wall Street as Fed soothes
 

Related Articles

NHC says Claudette weakens to tropical depression
NHC says Claudette weakens to tropical depression By Reuters - Jun 19, 2021 2

(Reuters) -Tropical storm Claudette which formed in the Atlantic, producing heavy rainfall, has weakened to a tropical depression on Saturday evening, the U.S. National Hurricane...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email