Crude oil prices in positive territory in early Wednesday trading after an industry report showed a decline in supplies on hand. File photo by Monika Graff/UPI |
License Photo
May 3 (UPI) -- Oil prices had some support early Wednesday from a U.S. industry report showing oil and gasoline inventories declined, but Russian output could spoil the rally.
Crude oil prices posted steep declines in Tuesday trading following reports of slowdowns in the U.S. and Chinese economies, the two largest in the world. A U.S. economic slowdown for the first quarter comes as labor figures fizzle with first-time claims for unemployment climbing 14,000 for the week ending April 22.
Payroll processor ADP reported private sector employment grew by 177,000 from March to April. The federal jobs report for April is due out on Friday.
Phil Flynn, a senior market analyst for the PRICE Futures Group in Chicago, said in a daily newsletter the Wednesday morning rally was fueled by a report from the American Petroleum Institute that showed U.S. crude oil supplies declined by 4.2 million barrels last week.
"The number came in at our target but was a much bigger drop than the street was looking for," he said. "It may signal a top in U.S. oil supply that should start feeling the drop in falling global oil output and rising demand."
That would be consistent with sentiments expressed early in the week by British energy company BP, which said the market was slowly returning to a healthy balance between supply and demand.
The price for Brent crude oil was up 0.77 percent about a half hour before the start of trading in New York to $50.85 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.6 percent to $47.95 per barrel.
Markets in previous sessions had posted strong gains before U.S. markets opened, only to fade into red territory after the trading day began. Wednesday's rally will be tested by official data from the U.S. Energy Information Administration, which publishes its weekly results about an hour after the start of trading. An EIA report showing less of a draw on inventories could test the $50 per barrel mark for Brent.
A daily report on market fundamentals from the brokers at PVM in London said oil prices may come under pressure from stronger investment positions from Russian oil companies. Russia is party to a multilateral deal coordinated by the Organization of Petroleum Exporting Countries to balance the market through managed declines, though signs point to steady production gains for the latter part of 2017.
"The prospect of a potential uptick in Russian oil production will cast a shadow over the oil market and exacerbate the underling tensions with the OPEC de facto leader," PVM's Stephen Brennock said in the report.
