Oil Rebounds From Six-Year Low on Weakening U.S. DollarMark Shenk
Oil recovered from the lowest close in six years as China’s currency devaluation helped weaken the dollar, drawing investors to crude.
China’s decision to devalue the yuan has spurred concern that its economy is faltering. The U.S. currency fell against the euro on speculation the Chinese move imperils the timing and path of rate increases from the Federal Reserve. On top of that, the International Energy Agency said global oil demand growth in 2015 will be the strongest in five years. Gasoline surged after U.S. supplies fell, as refineries were said to trim operations.
Oil has dropped about 30 percent since this year’s peak closing price in June amid speculation the global surplus that drove prices into a bear market will persist. Futures have swung between gains and losses this week on mixed signals from China.
“The market is trying to absorb the impact of the Chinese news,” Craig Bethune, a fund manager at Manulife Asset Management Ltd. in Toronto who focuses on energy and natural resources investments, said by phone. “The IEA report was bullish on demand growth.”
West Texas Intermediate for September delivery rose 22 cents, or 0.5 percent, to settle at $43.30 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 78 percent above the 100-day average. The contract slid $1.88 to $43.08 on Tuesday, the lowest close since March 2009.
Brent for September settlement climbed 48 cents, or 1 percent, to end the session at $49.66 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at a $6.36 premium to WTI.
The dollar fell to its weakest level in a month against the euro, bolstering the appeal of raw materials priced in the U.S. currency as an investment.
This year, global demand for oil will grow at more than twice 2014’s pace as low prices spur U.S. consumption and economies recover, the IEA said. World oil use will expand by 1.6 million barrels a day to average 94.2 million. Nevertheless, the oil glut will last through next year, according to the agency.
WTI retreated from the day’s highs after the Energy Information Administration said U.S. crude inventories fell 1.68 million barrels to 453.6 million in the week ended Aug. 7, the lowest level since March. Analysts surveyed by Bloomberg projected a 2 million-barrel decrease.
“There were hopes that the inventory numbers would be a bit more bullish than they turned out,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone.
Gasoline futures led gains as the unexpected shutdown of refinery units in New Jersey and Indiana has raised the prospect of lower inventories in the weeks ahead. BP Plc’s Whiting, Indiana, refinery, is running at minimum rates as it searches for source of leaks forcing the shutdown of its biggest crude unit Aug. 8, a person familiar with operations said. It’s the largest refinery serving the Chicago market.
“The report shows pretty healthy growth in gasoline demand,” Craig Bethune, a fund manager at Manulife Asset Management Ltd. in Toronto who focuses on energy and natural resources investments, said by phone. “Supplies dropped last week. There should be additional declines in the next report because of the refinery outrages.”
Supplies of gasoline dropped 1.25 million barrels to 215.5 million last week, the lowest level since November. Analysts projected a 675,000 barrel decline. Demand for the motor fuel averaged over four weeks climbed 70,000 barrels a day to 9.62 million, the most August 2007.
September gasoline futures increased 6.98 cents, or 4.1 percent, to close at $1.7635 a gallon. It was the highest settlement since July 31.