By Keith Wallis
SINGAPORE (Reuters) – Oil fell on Thursday on an unexpected build in U.S. crude stocks and a stronger dollar, but a recovery in Asian shares after Wall Street posted a near 2 percent gain overnight helped support prices.
Asian investors were focused on the increase in U.S. crude inventories last week, but sentiment had been supported by the rally on Wall Street, said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.
“I think any positive news will help. Maybe we’ll see not as much volatility,” Barratt said.
Brent crude oil for October delivery dropped 32 cents to $ 50.18 a barrel as of 0451 GMT, having gained 94 cents in the previous session. Brent fell below $ 50 a barrel to $ 49.95 a barrel before rebounding.
U.S. crude for October delivery fell 30 cents to $ 45.95 a barrel, after settling 84 cents higher in the previous session. The benchmark touched a low $ 45.65.
“Although oil may have escaped this round of bearishness, it may not escape the next few weeks with declining refinery capacity,” Singapore’s Phillip Futures said in a note on Thursday.
“On the flip side, we are seeing drops in U.S. oil production, which is healthy for prices in the longer run. Thus, would again suggest that the oversupply issue is easing,” the note added.
U.S. crude has see-sawed, climbing 27.5 per cent earlier this week and late last week in the biggest three-day percentage increase since August 1990, and rebounding from a 6-1/2-year low when West Texas Intermediate tumbled to $ 37.75 a barrel.
Oil would be well supported at around $ 42-$ 44 a barrel, Barrat said, but a fall below that level could put pressure on some OPEC economies.
“(OPEC production cuts) would only come into play if there is a sustained fall in oil prices,” he said.
Instead oil producers were banking on increased demand from the coming northern winter with refiners shifting production from gasoline to heating oil.
U.S. crude stocks saw an unexpected gain of 4.7 million barrels to 455.4 million in the week to Aug. 28, the biggest one-week rise since April, data from the U.S. Energy Information Administration showed on Wednesday. Analysts had expected inventories to remain unchanged.
A firmer U.S. dollar weighed on commodity prices on Thursday.
Investors are waiting for the outcome of a European Central Bank policy meeting later on Thursday, while U.S. non-farm payroll data is due on Friday. Chinese markets are closed for a holiday on Thursday and Friday.
COLUMN-Oil market takes a walk on the wild side (again): Kemp
For a 24-hr chart on Brent:
For a 24-hr chart analysis on U.S. oil:
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(Reporting by Keith Wallis; Editing by Richard Pullin)
