Oil dips first time in 10 days as trade muses over direction of rally
Investing.com - It was another blowout U.S. inventory report as far as oil bulls were concerned. Yet, crude prices dipped for the first time in 10 days as traders took stock of market direction after a 10% rally in that span.
Both New York-traded West Texas Intermediate, or WTI, crude and London-based global oil benchmark Brent lost close to 1% each Thursday despite the U.S. Energy Information Administration, or EIA, reporting a fourth straight weekly decline in domestic crude stockpiles.
WTI settled at $86.87 per barrel, down 67 cents, or 0.8%, on the day. It hit a 10-month peak of $88.09 in Wednesday's session. Despite the slide, WTI was still up 1.5% on the week, extending last week’s 7.2% gain.
Brent settled below the key $90 per barrel mark the first time in three days as it finished Thursday’s official trade at $89.22, down 68 cents, or 0.8%. Week to date, the global oil benchmark remained up 1.5%.
“Oil prices are finally in overbought territory,” Phil Flynn, an analyst at Chicago’s Price Futures Group, who’s typically bullish on all things energy, said, acknowledging the technical pressure brought on to the two crude benchmarks by a near 30% rally since mid-June.
As modest as Thursday’s correction may be, it would help attract more buying at the lower end, Flynn added.
Sunil Kumar Dixit, a commodities chartist who heads SKCharting.com, said WTI might need to drop beneath $86 to spur demand at the lower end.
“The bullish rally appears to be in the process of momentum distribution following double top on day time frame, though it's initial extent may be limited to $84.90&$84.40,” Dixit said.
“Downward consolidation requires a clear break below the previous day's low of $85.90, followed by a day close below the zone.”
The EIA reported that U.S. crude stockpiles dropped by 6.307M barrels during the week ended Sept. 1, extending the 10.584M-barrel draw in the prior week to Aug. 25..
Refiners had doubled down on fuel processing in the four weeks running up to the holiday, maintaining an extraordinarily high run rate of more than 93% of capacity. Fuel consumption is expected to moderate after the Labor Day holiday on Sept 4 unofficially brought to an end U.S. road trips for the summer.
On the fuels side, the EIA reported a drawdown as well in gasoline inventories for last week and a build in distillates.
On the gasoline side, the EIA reported a decline of 2.666M barrels, after a slide of 0.214M barrels last week. Analysts had forecast a decline of 0.950M for last week. Automotive fuel gasoline is the No. 1 U.S. fuel product.
With distillates, there was a build of 0.679M that added to the prior week’s gain of 1.235M. Analysts had anticipated a build of 0.239M for last week. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.
(Peter Nurse and Ambar Warrick contributed to this item)
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