Oil Rebounds Sharply On Weak Dollar, Talk Of Output Cuts

Oil futures rebounded sharply Wednesday, inspired by a sharp decline in the dollar and news that Russia has again raised the prospect of a meeting with the Organization of the Petroleum Exporting Countries.

Earlier, oil had dipped in response to a further rise in weekly crude inventories data.

March West Texas Intermediate crude CLH6, +5.86% tacked on $1.41, or 4.9%, to $31.33 a barrel on the New York Mercantile Exchange. It briefly took a turn lower to $29.78 after the supply data, then rebounded. Brent crude LCOJ6, +5.47% rose $1.52, or 4.7%, to $34.24 a barrel on London’s ICE Futures exchange.

Builds in crude inventories this time of year are “historically common, but not this big,” said John Macaluso, an analyst at Tyche Capital Advisors.

The U.S. Energy Information Administration reported on Wednesday that crude inventories rose by 7.8 million barrels for the week ended Jan. 29. The American Petroleum Institute on Tuesday reported a 3.8 million-barrel increase. Citi Futures forecast a rise of between 5 million and 6 million barrels, while analysts surveyed by The Wall Street Journal survey predict an increase of 3.5 million barrels.

The weekly increase lifted total crude supplies to 502.7 million barrels. The EIA pegs that as being near levels not seen for this time of year in at least the last 80 years, but analysts consider it to be the highest level on record.

“Inventories are at record highs with no significant talk of production cut,” said Macaluso.

“Recently oil-dependent countries have been holding ‘conversations’ with themselves about production cuts to give prices a bid, and it has worked,” he said. “Rumors of production cuts stream through the media filling the market with premium.”

Russia on Wednesday reiterated its willingness to talk with OPEC producers on a plan to help boost prices, according to a report from Reuters.

Read: How Russia’s ‘verbal intervention’ triggered an oil market rebound

But “until a production cut does happen fundamentals will continue to win the war while oversold technicals are winning the battles,” said Macaluso. “We stand pat on a lower for longer view, until fundamentals change.”

The EIA also said gasoline supplies rose by 5.9 million barrels, while distillate stockpiles fell by 800,000 barrels last week. Citi Futures was looking for a rise of 1 million to 2 million for gasoline and a fall of 1 million to 2 million for distillates, which include heating oil.

On Nymex, March gasoline RBH6, +0.76%  added less than half a cent to $1.004 a gallon and March heating oil HOH6, +4.71%  traded at $1.057 a gallon, up 4.5 cents, or 4.6%.

March natural gas NGH16, +0.54%  added a penny to $2.033 per million British thermal units.

Source: MarketWatch