Oil Rebounds as Strong U.S. Fuel Demand Quells Economic Worries
(Bloomberg) -- Oil rebounded Wednesday after a report showed surprisingly strong gasoline demand and a drawdown of heating fuels in the U.S., tempering fears of a global oversupply.
Futures in New York closed 0.7 percent higher, snapping a two-day losing streak. While the Energy Information Administration said domestic crude and gasoline inventories rose last week, both trailed analyst estimates. The fallout from the brutal cold that hit the U.S. also showed up in the data, with stocks of winter fuels shrinking by almost 5 million barrels combined.
The bullish hints on demand offered relief to traders jittery about economic growth. Despite OPEC’s efforts to cut global supplies, crude was on track for a third straight loss earlier in the session as slowing factory activity in Germany built upon reports of declining service-sector orders in the U.S.
“We’re seeing a modest gain on the EIA data," said Rob Haworth, who helps oversee about $164 billion at U.S. Bank Wealth Management in Seattle. “This is a quiet market that’s trying to find some footing and trying to find some news to create a more supportive narrative."
West Texas Intermediate crude for March delivery climbed 35 cents to $54.01 a barrel at the close of New York Mercantile Exchange trading.
Brent for April settlement rose 71 cents to $62.69 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude sold at an $8.35 premium to WTI for the same month.
The EIA data showed the four-week average for gasoline demand at its highest seasonal level since 2007. American crude production remained at an all-time high but didn’t increase over previous weeks, suggesting last year’s dip in oil prices is helping restrain the boom in shale drilling.
The draw on propane, heating oil and other fuels led total petroleum inventories to a 3.36-million-barrel decline.
Oil has hovered above $50 after its best start to a year in almost two decades. Production cuts by the Organization of Petroleum Exporting Countries, Russia and other exporters fueled the rally. Yet gains have been limited by lingering concerns over record U.S. output, America’s trade war with China and conflicting economic signs around the globe.
“The question in our minds remains ‘where is the growth going to come from?’" said U.S. Bank’s Haworth. “There’s still more work for this market to do at these price levels to convince us that a bullish narrative makes sense over the next few months."
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