The bulls are back!
Brent crude closed above $50 a barrel with West Texas Intermediate trailing close behind at $48 a barrel as undaunted traders stayed the course to reach a two-month high on Thursday, according to Bloomberg MarketWatch.
A larger-than-expected weekly decline in U.S. crude stockpiles lifted prices by more than 20% from their recent lows—meeting the definition of a bull market—as some traders held out hope that major oil producers will ease output.
On the New York Mercantile Exchange, September West Texas Intermediate crude added $1.43, or 3.1%, to settle at $48.22 a barrel. WTI prices are now 22% above their recent low of $39.51 which occurred on August 2.
On the London ICE Futures Exchange, October Brent crude tacked on $1.04, or 2.1%, to end trading at $50.89 a barrel. Brent crude prices are up 22% from their low earlier this month.
WTI marked its highest settlement in about seven weeks, according to data from Dow Jones, while Brent finished at a roughly eight-week high. Both crude grades have now posted gains for six sessions in a row.
“Oil futures continued to charge ahead to fresh highs, not because of any materially bullish fundamental news, but rather a short sellers strike as traders focus on the potential freeze that OPEC and Non-OPEC producers will discuss at a meeting next month,” said Tyler Richey, co-editor at The 7:00’s Report.
Saudi Arabia’s energy minister recently indicated that OPEC will hold an informal meeting at an Algiers energy forum in late September to discuss ways to stabilize the volatile market along with the possibility of freezing production levels.
Chances for an output freeze “remain slim,” said Richey. “If they were to disappoint this time though, the reaction could potentially be much more bearish than back in April because the underlying trend in U.S. production is increasing (bearish), while in Q2 it was decreasing (bullish).” Oil producers last spring had tried, and failed to agree on stabilizing production.
“This has investment traders continuing to buy into key commodities like gold and crude oil,” he said.
Data from the U.S. Energy Information Administration Wednesday revealed weekly declines for both crude and gasoline inventories, prompting prices that day to settle higher for a fifth session.
The report also showed that total weekly domestic production rose by 152,000 barrels a day to 8.597 million barrels a day. The EIA later explained that the figure incorporates a “re-benchmarking”—a monthly adjustment the agency may make to address a “disconnect” between the weekly and monthly petroleum supply report and other data.
Meanwhile, September natural gas rose 5.5 cents, or 2.1%, to settle at $2.674 per million British thermal units.
