Oil rallies as stockpile surprise brings relief from global rout

Singapore - A day after oil was swept up in a global market rout, crude is rebounding as investor focus snaps back to US supplies.

Futures in New York rose as much as 1.3%, after being dragged down 1.2% in the previous session as a flight from risk shook assets around the world. While equity markets are clawing back on calls to ‘buy the dip,’ crude’s advance is being driven by industry data that showed an unexpected decrease in US stockpiles.

Investors are watching if government data also surprises with a decline when it’s released on Wednesday.

As calm returns to markets, Goldman Sachs Group stuck to its bullish call on commodities, saying the recent global selloff only bolsters its view that raw materials are set to perform well in months ahead. Still, crude is struggling to extend last month’s gains that were largely driven by a weaker dollar, on speculation that US output will impede efforts by OPEC and its allies to curb a glut.

"What’s happening in the US has become critical to the oil market, whether it’s inventories and production figures or the movement in the greenback," Will Yun, a commodities analyst at Hyundai Futures, said by phone from Seoul. "While oil prices are likely to be supported at this level after its correction, the upcoming US data will be the deciding factor" for future prices.

Barrels bounce

West Texas Intermediate for March delivery rose as much as 79 cents to $64.18 a barrel and traded at $63.88 as of 11:39am in Singapore. The contract fell 76 cents to $63.39 on Tuesday. Total volume traded was about 16% above the 100-day average.

Brent for April settlement rose 46 cents to $67.32 a barrel on the London-based ICE Futures Europe exchange, snapping a three-day decline.
The global benchmark crude traded at a premium of $3.73 to April WTI.

The American Petroleum Institute was said to report US crude stockpiles slid 1.05 million barrels last week, with storage also shrinking at tanks in the key hub of Cushing, Oklahoma.

Nationwide inventories probably rose by 3.15 million barrels, according to a Bloomberg survey before a report from the Energy Information Administration due on Wednesday.

Other oil-market news:

Asian equities rallied, with some energy stocks eking out gains after tumbling on Tuesday. Cnooc added as much as 2.6% in Hong Kong, rebounding from a drop of more than 5%.  

Japan’s Inpex jumped as much as 4.7% after sliding 4.3% in the previous session.

Crude volatility continued higher, with the Cboe/Nymex Oil Volatility Index rising 6.2% on Tuesday after its biggest one-day gain since December at the start of this week.

Gasoline futures added 1% to $1.8231 a gallon, snapping a four-day decline.