Oil, Gasoline Surge as Corporate Earnings Boost Confidence
Source: Bloomberg, Mark Shenk (7/30/09)
"The fundamentals of the oil market are still poor, but investors are looking to the future."
Oil gained as much as 4.9% as stocks advanced on increased optimism that the economic decline will ease. A U.S. report yesterday showed that crude supplies unexpectedly climbed as demand lagged behind year-earlier levels.
"More people think the economy has bottomed and are buying equities and commodities as a result," said Bill O'Grady, the chief market strategist for Confluence Investment Management in St. Louis. "The fundamentals of the oil market are still poor, but investors are looking to the future."
Crude oil for September delivery rose $2.98, or 4.7%, to $66.33 a barrel on the New York Mercantile Exchange. The contract is heading for the biggest gain since May 18. Prices are up 49% this year.
Gasoline for August delivery increased 9.27 cents, or 5%, to $1.9477 a gallon in New York. A close at this price would be the biggest gain since April 2.
Yesterday, futures dropped $3.88, or 5.8%, to $63.35, the biggest one-day decline since April, after the Energy Department reported that crude-oil inventories gained 5.15 million barrels to 347.8 million in the week ended July 24.
"Yesterday, we had a big selloff based on supply and demand," said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. "It looks like we are back to trading on extraneous external factors like the equity market and dollar instead of the fundamentals."
Goldman Sachs Group Inc. maintained its forecast that West Texas Intermediate crude oil will reach $85 a barrel by year-end as the recent weakness in fundamentals will be temporary.
"Concerns over economic growth and weak oil statistics led a commodity selloff yesterday," Goldman analysts, led by London-based Jeffrey Currie, said in a report today. "However, we believe most of these drivers are less negative than they first appear."
Brent crude oil for September settlement on London's ICE Futures Europe exchange increased $3.34, or 5%, to $69.87 a barrel.