Wednesday, Aug 08, 2012
By John M. Biers
NEW YORK--Crude futures reversed earlier losses Wednesday and jumped into positive territory in anticipation of U.S. oil inventory data and after an economic report suggested greater U.S. inflation.
Crude futures on the New York Mercantile Exchange, which began the day in negative territory, were up 53 cents to $94.20 a barrel Wednesday. Brent crude futures were up 83 cents to $112.83 a barrel.
Market participants cited a report Tuesday from the American Petroleum Institute, an industry group, which said that crude inventories last week fell by 5.4 million barrels, an extremely large decline. A similar API report last week from API portended a large inventory decline by the U.S. Department of Energy.
The U.S. Energy Information Administration will release its weekly inventory report this morning at 10:30 a.m. A Dow Jones survey of analysts said the quantity of oil in storage fell by 500,000 barrels.
Analysts also pointed to U.S. productivity and labor cost data released early Wednesday. Nonfarm business productivity, the output per hour of all workers, rose at a 1.6% annual rate in the second three months of 2012, the Labor Department said Wednesday. Unit labor costs were up 1.7% during the period.
Economists surveyed by Dow Jones Newswires had forecast that productivity would rise 1.3% in the quarter and labor costs would rise 0.6%.
John Kilduff, a trader at Again Capital, called the U.S. data "slightly inflationary" because of the rise in labor costs.
The data release comes on the heels of a series of recent outages that have raised concerns about market tightness. They include a refinery fire at a Chevron Corp. (CVX) plant in California and an Enbridge Inc. (ENB) pipeline outage in the U.S. Midwest. Analysts also cited upcoming maintenance in the North Sea as a tightening factor.
These outages--combined with concerns about stability in the Middle East and optimism about further Federal Reserve moves--have helped notch crude oil and gasoline to three-month highs.
Phil Flynn, an analyst at Price Futures Group, said crude has been on the rise ever since European Central Bank President Mario Draghi pledged to take aggressive action to protect the euro.
"The market is rallying on the belief that economic stimulus is just around the corner," Mr. Flynn said.
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(END) Dow Jones Newswires
August 08, 2012 10:20 ET (14:20 GMT)