28 January 2015 – Oil jumped as much as 3% on Tuesday as a weak dollar propped up commodities, but crude prices came off their highs in post-settlement trading on signs of another big US supply build last week.
Oil prices were up most of the day, tracking the dollar, despite concerns about rising US inventories.
While some traders expressed surprise with the market’s behavior, others shrugged it off as they did not think oil was on the cusp of an extended recovery because of nagging worries about the global oversupply in crude.
The American Petroleum Institute (API), an industry group, said after the market’s close that US oil stockpiles surged by nearly 13 million barrels last week.
A Reuters poll showed US crude stockpiles rose by 4.1 million barrels, on average, in the week to 23 January.
That would add to the previous week’s build of over 10 million barrels, the biggest in 14 years, which had already brought inventories to the highest level on record for this time of year.
Genscape, which tracks oil inventories, reported a near 2.4 million-barrel build last week in Cushing, the Oklahoma delivery point for US crude futures, a market source said.
Official data on last week’s inventories will be reported by the US Energy Information Administration on Wednesday.
“Given the expectations in supply, it’s kind of surprising to see the market pop this much today,” said Andrew Lipow, president at Lipow Oil Associates in Texas.
“There’s probably some short-covering after the extended selloff we’ve had for weeks now, but I don’t think fundamentally anything’s changed.”
The dollar retreated from an 11-year high in the previous session, falling about 1 percent to the euro after weaker-than-expected orders for US durable goods in December.
Benchmark Brent crude settled up $1.44, or 3%, at $49.60 a barrel after rallying to just a penny short of $50. The last time Brent was at $50 was on 22 January.
US crude futures finished up $1.08, or 2.4%, at $46.23 a barrel, after a session peak at $46.55.
The API data, released two hours after the close in US crude, pared the trading gains.
Brent was at $49.25 a barrel by 5:00 p.m. ET (2200 GMT), while U.S. crude traded below $45.80.
Trading volumes in US oil futures were about half their usual levels, with many traders in New York working away from their desks after a blizzard swept across the northeastern United States.
Thomson Reuters data showed less than 300,000 lots traded for the front-month contract in US crude.
Oil prices have slumped nearly 60% since peaking in June, driven lower by ample supplies from the US shale oil boom and the Opec decision not to cut output.
Opec Secretary-General Abdullah al-Badri said on Monday prices might have bottomed after the seven-month selloff, and warned of a possible spike to $200 a barrel.
Investment banks, however, remain bearish on oil. Swiss bank UBS lowered its 2015 forecasts for Brent to $52.50 a barrel and WTI to $49 a barrel.
Goldman Sachs’ chief commodity analyst said in a research note that demand growth in China and other emerging economies was set to slow.