Thursday, March 03, 2016 1:05:28 AM
By Jenny W. Hsu
Published: Mar 3, 2016 12:51 a.m. ET
Crude-oil prices rose in early Asian trade Thursday as a decline in U.S. production prompts more risk-taking in the market.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in April CLJ6, +0.40% traded at $34.84 a barrel, up $0.13, or 0.4%, in the Globex electronic session. May Brent crude LCOK6, +0.27% on London’s ICE Futures exchange rose $0.09 to $37.02 a barrel.
The U.S. Energy Administration on Wednesday reported the country’s crude inventories in the week ended Feb. 29 grew 10.4 million barrels, sending total stockpiles to a weekly high of 518 million barrels. Historical monthly data show inventories last surpassed 500 million barrels in 1930.
Analysts say the growth in crude stocks was mainly driven by stronger imports as refining margins remains robust given crude prices are still almost 70% lower from mid-2014 levels.
However, the market shrugged off the bigger-than-expected growth and honed in on the decline in production, which fell for the sixth week to 9.08 million barrels a day, and the drawdown in gasoline stocks, which fell by 1.5 million barrels, suggesting healthy demand.
“The message is clear, risk is on, traders are betting on a light at the end of the tunnel with regard to the global economy and hope that oil producers will somehow enforce the production freeze,” said Stuart Ive, a client manager at OM Financial.
Oil prices have been battered in the past 20 months. But tide has gradually turned recently, mostly buoyed by rising expectation of a production adjustment after the Russian energy minister said a “critical mass” of oil producing countries are on board to hold productions at January levels.
A meeting is planned later this month in which producers will discuss the details of the proposed action. Nymex and Brent were last trading up 5% and 3.5% respectively so far this week.
“Remember, the fundamentals have not changed at all because the world is still very much oversupplied. The market is mostly reacting to information and not actual changes,” said Gao Jian, an energy analyst at SCI International.
The renewed optimism in the market, however, is strengthening the argument that “the bottom in the crude oil market could now be in place for 2016,” said ANZ Research.
Nymex reformulated gasoline blendstock for April RBJ6, -0.21% — the benchmark gasoline contract — rose 2 points to $1.3109 a gallon, while April diesel traded at $1.1129, 64 points higher.
ICE gasoil for March changed hands at $328.00 a metric ton, down $3.50 from Wednesday’s settlement.
http://www.marketwatch.com/story/crude-prices-higher-as-us-production-sparks-up-risk-appetite-2016-03-03
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