Investing.com – Volatility was back forcefully in oil Wednesday with the market jumping nearly 3% to recoup almost all it lost in the previous session.
Bulls were pouncing on government data showing a smaller-than-expected build in weekly U.S crude stockpiles.
Gone were worries that there might not be a trade deal anytime soon between the United States and China – the catalyst for Tuesday’s selloff.
Also cast aside was the likelihood of the Federal Reserve indicating in its October meeting minutes released at 2:00 PM ET that it might be done with rate cuts for this year.
Underpinning the market’s comeback was the Energy Information Administration’s report that U.S. crude stockpiles rose by 1.4 million barrels last week – about 100,000 barrels below market expectations.
Also adding to the bullish fervor was Russian President Vladimir Putin’s indication that Moscow will support OPEC in whatever way necessary on production cuts when the cartel holds its meeting next month.
Russia is part of the OPEC+ alliance, formed with the 14-member Organization of the Petroleum Exporting Countries, which has committed to keeping 1.2 million barrels per day of supply off the market for price support.
NYME-traded WTI was up $1.59, or 2.9%, at $56.94 per barrel by 1:45 PM ET (18:45 GMT). It fell 3.1% Tuesday. ICE (NYSE:ICE) Futures-traded U.K. Brent rose $1.42, or 2.9%, to $62.67. Brent had slumped 2.5% in the previous session.
Energy stocks surged with the rising prices. Chevron (NYSE:CVX), up 1%, and Exxon Mobil (NYSE:XOM) were the top-performing stocks in the Dow Jones Industrial Average, which was down 0.8% or about 213 points.
“There’s little justification, of course, for the market to put back on almost everything it lost the previous day, simply because we got a slightly lower build number for crude,” said Tariq Zahir, managing member at the oil-focused Tyche Capital Advisors in New York.
“But that’s what volatility is all about, and you’re seeing it because of the uncertainty over the trade talks, the Fed’s course of action in December and what Russia and OPEC is going to ultimately do. All these are prompting traders to hedge in whatever way they think is right.”
Aside from the smaller-than-expected crude build, the EIA also announced modest differences to gasoline and distillates inventories compared to market expectations.
Gasoline stockpiles rose by about 1.8 million barrels, versus analysts’ expectations for a rise of 870,000 barrels.
Distillates inventories fell by about 1 million barrels, compared with forecasts for a decline of about 730,000 barrels.