Oil Rallies on Solid Inventory Numbers
Oil markets received a much needed shot in the arm as sentiment on riskier assets continued to benefit globally. Wednesday’s better than expected economic data along with robust petroleum inventory numbers aloud oil prices to rise nearly $4 dollars a barrel to test the $80 level.
Prior to Wednesday trading session, ADP private payrolls indicated that while US labor market conditions remain soft, conditions continue to improve. The better than expected ADP report bodes well for oil bulls as the private payroll report does not include Augusts striking Verizon workers which returned to payrolls in September.
Private non government employers increased payrolls by 91,000 jobs in September, up from 89,000 in August. Analysts had expected private payrolls to rise by 50,000 jobs. The change in jobs in the ADP report was driven by gains in the service sector, which added 90,000 jobs in September. Manufacturers, cut 5,000 jobs on balance as global growth concerns created small job cuts.
Oil prices received a boost from the Department of Energy’s inventory report, released at 1430 GMT. According to the EIA, U.S. commercial crude oil inventories decreased by 4.7 million barrels from the previous week. This compares to expectations of a decline of 1 million barrels. Total motor gasoline inventories decreased by 1.1 million barrels last week and also were better than analysts’ expectations.
The demand side of the equation was less favorable for oil prices, Total demand over the last four-week period averaged nearly 19.0 million barrels per day, down by 1.3 percent compared to the similar period last year. Gasoline demand was lower by 1.7 percent year over year while, distillate fuel was higher by 2.0 percent from the same period last year.
Oil prices moved higher in above average volume, as investors pushed the benchmark WTI toward resistance near the 9 day moving average at 79.99. A break of this level is likely the impetuous needed to test resistance near the 20-day moving average near 84.05. This level coincides with the highs seen in the middle of last week. Support on WTI crude oil is seen near the lows at $76 dollars per barrel. A break to the upside will keep crude in a range between $75 and $90.