Oil settles up, rebounds from lows after European storage report

OIL prices closed a volatile session slightly higher on Thursday (Aug 24), falling a US dollar a barrel in early trading on demand worries and a strong US dollar, but then bouncing back after a report of sliding gasoil stocks in Europe.

Prices began to recover at mid-morning in New York after Dutch consultancy Insights Global posted data showing gasoil stocks held in independent storage in the Amsterdam-Rotterdam-Antwerp refining and storage hub declined by 3 per cent in the latest week.

Brent crude rose 15 US cents, or 0.2 per cent, to US$83.36 a barrel, while US West Texas Intermediate crude rose 16 US cents, or 0.2 per cent, to US$79.05 a barrel. Prices traded lower for the majority of the session, before pushing higher in the last half hour of trading.

Falling refined product stocks in Europe and a drop in the 2-year US treasury yields likely lifted oil prices, UBS analyst Giovanni Staunovo said, adding that volatility is likely to persist until investors get clarity on the US Federal Reserve’s next moves.

Federal Reserve officials and other global central bankers were headed to Jackson Hole. Fed chair Jerome Powell will address the symposium on Friday. Investor caution on the eve of his remarks lifted the safe-haven US dollar, which makes oil more expensive for holders of other currencies, denting demand.

On Wednesday, Japan reported shrinking factory activity for a third straight month in August. Eurozone business activity also declined more than expected and Britain’s economy looked set to shrink in the current quarter.

US business activity approached the stagnation point in August, with growth at its weakest since February. But data also that showed labour market conditions remained tight despite the Fed’s aggressive interest rate hikes.

“The US is still in a strong position but there are areas of weakness and if interest rates are going to stay higher for longer, further cracks could appear,” said Craig Erlam, analyst at Oanda.

“Perhaps this economic doubt has contributed to the stalling we’ve seen and may even trigger a correction,” Erlam added.

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On the supply side, Iran’s crude oil output will reach 3.4 million barrels per day (bpd) by the end of September, the country’s oil minister was quoted as saying by state media, even though US sanctions remain in place.

US officials are also drafting a proposal that would ease sanctions on Venezuela, allowing it to export more oil if the South American nation moves towards a free and fair presidential election, according to sources. REUTERS