Oil Steadies After Refinery Data Spurs Biggest Gain in 8 Weeks

  • U.S. refineries bolstered operating rates a second week: EIA
  • Nation's crude producers increased output by 0.2% last week

Oil steadied after its biggest rally in eight weeks in New York as the focus shifted from rising U.S. refinery demand to the prospects for a U.S. interest rate gain this year.

Futures edged 0.3 percent higher after surging 6.3 percent yesterday. U.S. refiners boosted operating rates last week, according to an Energy Information Administration report Wednesday.  Odds the Federal Reserve will move on rates at their next meeting jumped to 50 percent from around 32 percent a week ago, based on futures prices, after officials signaled they’re prepared to tighten. Data showed American economic growth slowed last quarter.

"The oil market is being held back by macroeconomics," Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone. "We rose strongly on the refinery utilization number yesterday and the outlook for rising crude demand. That couldn’t be maintained when the disappointing GDP number sent stocks lower."

Oil failed to sustain a gain above $50 a barrel earlier this month as the global glut showed little sign of easing any time soon. U.S. crude stockpiles are more than 100 million barrels above the five-year seasonal average, EIA data show. The Organization of Petroleum Exporting Countries continues to pump above its quota and the International Energy Agency estimates the surplus will remain until at least the middle of 2016.

WTI, Brent

West Texas Intermediate for December delivery increased 12 cents to close at $46.06 a barrel on the New York Mercantile Exchange. It’s the highest close since Oct. 16. The contract gained $2.74 on Wednesday, the most since Aug. 31. The volume of all futures traded was 3.2 percent above the 100-day average at 2:56 p.m.

Brent for December settlement dropped 25 cents, or 0.5 percent, to end the session at $48.80 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude closed at a $2.74 premium to WTI.

"We’re seeing a bit of a hangover after yesterday’s huge move," Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania, said by phone. "Demand for crude is going to pick up because refineries are finishing maintenance."

Refining Rate

U.S. refineries operated at 87.6 percent of capacity after processing rates increased for a second week, the EIA said. U.S. plants typically slow during September and October to perform maintenance during a low fuel-demand period.

Crude inventories increased by 3.38 million barrels through Oct. 23, expanding for a fifth week in the longest run of gains since April. Production grew by 16,000 barrels a day to 9.11 million.

"I still believe we’re in a slow motion crash even after yesterday’s big gain," Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $128 billion of assets, said by phone. "We continue to push up against the supply and demand fundamentals." Those fundamentals will need to shift before oil will trade in a higher range, he said.

Commerce Department data Thursday showed American gross domestic product expanded at a slower pace in the third quarter, growing at a 1.5 percent annual rate, in line with the 1.6 percent median forecast of economists surveyed by Bloomberg. GDP expanded 2.4 percent in 2014.

Royal Dutch Shell Plc posted its biggest net loss in more than a decade on Thursday after halting some operations and lowering its oil-price expectations, resulting in a $7.89 billion charge. Eni SpA said it would reduce capital spending by 17 percent this year as it reported a quarterly loss.

Shell, which is buying BG Group Plc in the industry’s largest deal this year, reported a third-quarter net loss of $7.42 billion, compared with a profit of $4.46 billion a year earlier. Eni, Italy’s largest oil producer, reported an adjusted net loss of 257 million euros ($282 million) for the period.

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