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Tuesday, May 24, 2022

Oil pushes sharply higher on equities strength, weaker dollar

Oil futures continued to climb Thursday, boosted by stronger equities and a weaker dollar, pushing towards multi-week highs in afternoon US trading.

NYMEX June crude settled $2.21/barrel higher at $93.64/b after climbing steadily since 11:00 a.m. EDT (1500 GMT), breaking through both the 200- and 100-day rolling averages. The front-month contract peaked at $93.87/b — its highest level since April 11 — late in the afternoon session.

In the last two days of trading, the June NYMEX crude contract has climbed $4.46/b or 5%.

ICE May Brent also settled higher, up $1.68/b at $103.41/b, but trailed gains seen in the NYMEX crude complex throughout much of the second half of the US trading day. The front-month contract peaked at $103.49/b, the highest level seen since April 12.

The gains in the NYMEX crude complex Thursday reduced the spread between the two front-month crude contracts to its narrowest point since January 2012, as it pulled in to $9.54/b before widening again to settle at $9.77/b.

“It looks as if the market is getting some gains from equities and the dollar,” Tradition Energy analyst Gene McGillian said. “It’s taking back some of the losses from earlier in the month…as selling pressure has dried up and fears of slower economic conditions have taken a bit of a step back.”

Stronger macroeconomic indications helped to fuel a bullish tone in both commodities and equities markets overnight, analysts said, which carried over and accelerated during the US trading day.

Both South Korea and the UK issued positive GDP ratings overnight. The UK’s Office for National Statistics showed gross domestic product rising 0.3% in first-quarter 2013, allowing the country to narrowly avoid a triple-dip recession.

“The UK’s avoidance of a triple-dip recession has the pound rallying at the expense of the dollar, which is supporting commodity prices,” Mike Fitzpatrick, editor-in-chief of the Kilduff Report, said in a note. “The UK’s growth of 0.3% was still anemic, but it helps its citizenry avoid the malaise induced from the country’s vaunted tabloids screaming ‘triple-dip!’ and worse.”

The US dollar softened against most major currencies as the UK pound climbed to its highest level against the dollar since mid-February. At the 2:30 p.m. EDT (1830 GMT) NYMEX market settle, the US Dollar Index was down 0.39% at 82.725.

Analysts said that equities markets were also drawing support from favorable weekly jobless data out of the US.

Initial jobless claims slid by 16,000 over the week ending April 20 to clock in at 339,000, the Bureau of Labor Statistics said in a release. The week-on-week drop exceeded market expectations, even as the previous week’s initial claims were revised upwards to 355,000. Continuing claims fell by 93,000 over the week to 3 million.

At 2:30 p.m., the Standard & Poor’s 500 was up 0.76% at 1,590.78, while the Dow Jones Industrial Average was 0.51% higher at 14,751.5.

Products markets also climbed higher on Thursday, boosted in part by the surge in crude prices, though analysts said the market was starting to reexamine its initial lackluster reaction to the heavy draw in gasoline stocks seen in Wednesday’s US Energy Information Administration fuel inventory report.

NYMEX May RBOB closed US trading 6.44 cents higher at $2.8118/gal.

“The advance in oil prices is also being supported by a renewed focus on Wednesday’s DOE report, which included an unexpected 3.9 million barrel drop in gasoline inventories,” Citi Futures Perspective analyst Tim Evans said in a note.

NYMEX May heating oil settled 6.04 cents higher at $2.9017/gal.

Source: platts.com

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