Oil Climbs as ECB Expansion of Stimulus Bolsters Optimism

  • Stocks, dollar gain after ECB head raises bond purchase limit
  • Supplies almost 100 million barrels above five-year average

Oil climbed after European Central Bank President Mario Draghi vowed to use all tools within his mandate to support economic recovery.

Futures climbed 1.1 percent in New York, extending Wednesday’s 1.9 percent gain amid speculation that further stimulus will bolster European fuel demand. Crude gains eased and equities retreated from their highs as attention turned later in the day to how payrolls data will influence the timing and pace of Federal Reserve interest-rate increases.

Oil has fluctuated this week after capping the biggest three-day rally in 25 years on Monday. Futures dropped earlier as President Barack Obama secured congressional support for the Iranian nuclear deal and U.S. crude supplies increased the most since April, signaling a global glut will persist.

"We’re tracking what’s happening with the equity market and dollar today," Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said by phone. "It’s hard too get too excited about oil itself, because the fundamentals are very bearish."

West Texas Intermediate oil for October delivery rose 50 cents to settle at $46.75 a barrel on the New York Mercantile Exchange. The contract touched $37.75 on Aug. 24, the lowest level since February 2009. Prices are down 12 percent this year.

Global Benchmark

Brent for October settlement increased 18 cents to end the session at $50.68 a barrel on the London-based ICE Futures Europe exchange. The North Sea crude touched $42.23 on Aug. 24, the least since 2009. The European benchmark closed at a $3.93 premium to WTI.  

The Chicago Board Options Exchange Crude Oil Volatility Index climbed to the highest level since March 17 on Tuesday. The gauge tracks hedging costs on the U.S. Oil Fund, the biggest exchange-traded fund tracking WTI.

"Volatility is still the dominant theme," Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut, said by phone. "The big question right now is whether we have put in the bottoms of around $38 for WTI and $42 for Brent. I’m doubtful."

Saudi Price Cuts

Saudi Arabia cut pricing for all October oil sales to the U.S. as refinery demand falls with the end of the summer driving season on the Sept. 7 Labor Day holiday. State-owned Saudi Arabian Oil Co. cut its selling price for October Arab Medium sales to U.S. buyers by 50 cents a barrel, to 55 cents less than a regional benchmark, widening the discount for the first time in eight months, the company said in an e-mailed statement Thursday.

"I wonder how real much of this trading is because a lot of people are already off ahead of Labor Day," Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion, said by phone. "We’re in a trading range and there’s a lot of movement up and down, but we’re not in any new territory."

Crude futures slipped to six-year lows after China’s Aug. 11 devaluation of its currency roiled global financial markets, sparking concern that slowing growth there may spread. The Chinese exchanges are closed for a holiday Thursday, giving investors a respite from market moves there.

"The lack of bad news from China is helping the market," McGillian said.

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