13 March 2014, News Wires – The US oil benchmark plunged more than 2% overnight in its biggest drop in two months after Washington announced a surprise plan for a test release of strategic oil reserves, while weekly data showed a big rise in crude stockpiles.
Markets are now awaiting economic data from China to gauge the health of the world’s second-biggest economy.
Brent crude rose $0.24 to $108.26 by Thursday morning, after ending $0.53 down to its lowest in a week.
US crude gained $0.11 to $98.10, after settling at $97.99, below the 50-day moving average of $98.32.
“We are seeing some snap back reaction because the market is seeing the strategic sale as a one-off at this point, barring any emergencies,” OptionsXpress market analyst Ben Le Brun told Reuters. “The long-term story for China is intact because they have tools at their disposal to steer the economy in case growth is lower than their expectation.”
The sharp fall in the US benchmark kept the price between the two contracts wider than $10 per barrel.
The Brent price drew support from the unfolding crisis in Ukraine. The European Union agreed on a framework on Wednesday for its first sanctions on Russia since the Cold War.
US fourth quarter growth is expected to be revised after services industry data suggested a much stronger pace of consumer spending than the government had previously assumed, also expected to underpin oil growth.
“I am quite optimistic about the global economic recovery, led by the United States,” Le Brun reportedly said.
“That will support oil in the longer term given that the United States is the biggest consumer.”
World oil demand will increase more than expected in 2014, the Organization of the Petroleum Exporting Countries (OPEC) said, raising its prediction for a second straight month as economic growth picks up in Europe and the US.
In a monthly report, OPEC said global demand will rise by 1.14 million barrels per day this year, up 50,000 bpd from its previous forecast.
Yet, further gains were capped by data from the US Energy Information Administration that showed stockpiles of crude rose 6.2 million barrels last week, in the biggest weekly increase since the week ending 24 January.
Inventories partly surged with refinery utilization rates dropping 1.4 percentage points to 86% of capacity as units shut for spring maintenance.
The US announced a first test sale of crude from its emergency oil stockpile since 1990.
It is offering a modest 5 million barrels in what some observers saw as a subtle message to Russia from the Obama administration.