28 May 2014 – Brent futures rose on Wednesday, holding above $110 per barrel on renewed optimism over steady demand growth in the world’s top oil consumer the US following healthy economic data, with supply disruption concerns providing additional support.
Orders for long-lasting US manufactured goods unexpectedly rose and consumer confidence perked up, underpinning risk assets and bolstering US equity markets to another record close.
Some analysts see the sharp gains in shares possibly prompting more profit-taking, however, and in turn dragging down oil.
Brent crude gained $0.24 to $110.26 at Wednesday morning after ending $0.30 cents lower as some profits were booked following a long holiday weekend.
US oil gained $0.02 cents to $104.13 after losing $0.24 cents in the previous session.
“There are quite a few bullish factors in the oil market that are supportive, we have good economic indicators and uncertainty over Libya and Ukraine,” Astmax Investment commodity fund manager Tetsu Emori told Reuters.
“But the US equity market is too strong. My worry is if we see some profit-taking in equities, oil may fall as well.”
While the probability for a slide in oil is low, any fall triggered by investors booking profits may see Brent declining to $108.50 per barrel if the contract manages to drop past the $110 and $109 levels, Emori said.
Similarly, a strong support level for the US benchmark is $101 if it slips below $103, he said.
Another record close for the S&P 500 overnight prompted Asian stocks to rise on Wednesday, with the dollar near an eight-week high against a basket of currencies.
“Oil is drawing support from factors that are outside of the oil market,” Emori said.
The overnight US data is adding to gains in a market already elevated by supply disruption worries in Libya and the widening rift between Russia, the world’s top oil producer, and the West over Ukraine.
Ukrainian aircraft and paratroopers killed more than 50 pro-Moscow rebels in an assault that raged into a second day on Tuesday after a newly elected president vowed to crush the revolt in the east once and for all.
In Libya, a brigade from the country’s Petroleum Facilities Guard has been protesting and disrupting operations at the Hariga port to demand salary payments. The protest was interrupting work at the port, where full storage tanks have forced a stoppage of production at Sarir oilfield and a reduction at Messla oilfield.
Investors are also awaiting commercial stockpile data from the US to gauge the country’s demand growth outlook.
US commercial crude oil stocks and refined product inventories were expected to have risen in the week to 23 May, a preliminary Reuters poll of five analysts showed.
The survey forecast crude oil stocks to have increased 700,000 barrels last week. The survey is taken ahead of weekly inventory reports from the American Petroleum Institute and the US Department of Energy’s Energy Information Administration.
The inventory reports are coming out a day later than normal because of the US holiday on Monday.
Helping to cap gains in oil are rising exports from key Middle Eastern exporter Iraq.
Oil exports from its southern terminals are on track for a record high in May, according to loading data and industry sources. Shipments have averaged 2.60 million barrels per day in the first 27 days of May, according to shipping data tracked by Reuters.
*Bianca Bartucciotto – Upstreamonline