Oil’s Wednesday gain set to wipe out Tuesday’s losses by a factor of two!
Oil futures rebounded Wednesday, moving in step with a global rally in assets perceived as risky, as investors focused on geopolitical optimism and forecasts for shrinking U.S. supplies ahead of more closely followed weekly inventory reports. “Positive sentiment towards risky assets,” with U.S. and global benchmark stock indexes also rising in Wednesday dealings, kept the oil “bears at bay, for now,” said Fawad Razaqzada, technical analyst at Forex.com. West Texas Intermediate crude for October delivery CLV19, gained $2.43, or 4.49%, to $56.35 a barrel on the New York Mercantile Exchange, following Tuesday’s 2.1% decline, which led to the lowest front-month contract finish since Aug. 26. The global benchmark, November Brent crude BRNX19, +4.26%, rose $2.49, or 4.27%, to $60.77 a barrel, more than wiping out its 0.7% drop from a day ago, on ICE Futures Europe. U.S. petroleum inventory data from the American Petroleum Institute and the U.S. Energy Information Administration will be each delayed by a day to Wednesday and Thursday, respectively, because of the U.S. Labor Day holiday on Monday, when most major U.S. markets were closed. The EIA is expected to report a fall of 3 million barrels in domestic crude supplies for the week ended Aug. 30, according to a survey conducted by S&P Global Platts. That would mark a third straight weekly decline for crude stockpiles. Hope of weakening U.S. supplies and some upbeat developments in Asia have helped underpin buying in risky assets. Equity markets in Hong Kong HSI, +3.90% jumped by the most in a day since November after the city’s Chief Executive Carrie Lam said she would formally withdraw the extradition bill that sparked monthslong demonstrations that have hurt the territory’s economy. Still, some crude investors remain worried that the global outlook remains dim, marked by unresolved trade tensions between the U.S. and China, and signs of weakening economic growth, including in the U.S.—factors that could eventually erode oil demand. On Tuesday, the Institute for Supply Management manufacturing index fell to 49.1% in August—the reading was the lowest since January 2016 and indicated a contraction in activity. That report was released after the U.S. and China both raised tariffs on goods imported from the other, including a 5% levy on U.S. oil to China.
“The ongoing trade war between the world’s largest economies has hurt China perhaps more than the U.S. but a few signs of a slowdown have now emerged in the U.S. too – not least the ISM’s manufacturing purchasing managers index, a key factory gauge, which unexpectedly contracted for the first time since 2016,” wrote Fawad Razaqzada, market analyst at Forex.com, in a Wednesday research report.