Oil Rebounds From Seven-Week Low as Slump Is Viewed as Overdone

July 9 Crude oil rebounded from a seven-week low as traders took the view that the decline in prices during the longest losing streak this year was overdone.
Oil snapped a six-day slump as traders bought contracts based on technical indicators. Crude has fallen below $62.55 a barrel yesterday, the lower resistance level of the Bollinger Band, indicating it was oversold.
“In the short term, $60 may be the intraday support level, but in the longer term we have to go back to fundamentals, which are weak,” said Clarence Chu, an options trader at Hudson Capital Energy in Singapore.
Crude oil for August delivery gained as much as 85 cents, or 1.4 percent, to $60.99 a barrel on the New York Mercantile Exchange, and traded at $60.81 at 3:30 p.m. Singapore time. Futures touched $60.01 yesterday before closing down 4.4 percent at $60.14, the lowest settlement since May 19. Crude has fallen 15 percent since June 29.
Oil “got very close to $60 and probably attracted a bit of buying support around that level,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.
Crude also gained as the Washington-based International Monetary Fund said in a revised forecast yesterday that the world economy will expand 2.5 percent in 2010, compared with its April projection of 1.9 percent growth. A contraction this year will be 1.4 percent, worse than an April forecast for a 1.3 percent drop, the IMF said.
China’s passenger-vehicle sales rose 48 percent in June, the biggest jump since February 2006, as government stimulus spending spurred a revival in the world’s third-largest economy.
Gasoline Supplies
U.S. oil inventories dropped 2.9 million barrels to 347.3 million last week, the lowest since January, an Energy Department report showed yesterday. Refineries operated at 86.8 percent of capacity, down 0.2 percentage point from the previous week, the department said.
Gasoline stockpiles climbed 1.9 million barrels to 213.1 million in the week ended July 3, more than twice the increase forecast in a Bloomberg News survey, the Energy Department said. Motor fuel inventories were forecast to increase 900,000 barrels last week, according to the median of 16 responses in News survey.
Gasoline for August delivery rose as much as 2.47 cents, or 1.5 percent, to $1.6580 a gallon in New York. Yesterday, it declined 5.7 percent to settle at $1.6333, the lowest settlement since May 6 and the biggest one-day drop since March 30.
Inventories of distillate fuel, a category that includes heating oil and diesel, rose to the highest since 1985 as consumption dropped to a 10-year low.
Distillate Overhang
Distillate fuel inventories rose 3.74 million barrels to 158.7 million, the biggest gain since January, the report showed. The increase left supplies last week 30 percent higher than the five-year average for the period. Supplies were estimated to rise 1.83 million barrels.
“We may see further price drops, especially for distillates as we have an acute overhang in the U.S. and Europe,” Antoine Halff, head of energy research at Newedge USA LLC in New York, said in an interview.
Total U.S. daily fuel demand averaged 18.4 million barrels in the past four weeks, down 5.9 percent from a year earlier, the report showed. Distillate consumption fell 12 percent to 3.27 million over the period, the lowest since July 1999.
Brent crude for August settlement rose as much as 94 cents, 1.6 percent, to $61.37 a barrel on London’s ICE Futures Europe exchange and was at $61 at 3:06. p.m. in Singapore. Yesterday, it declined $2.80, or 4.4 percent, to $60.43, the lowest settlement since May 25.
Brent is trading at a 32 cent premium to crude oil offered in New York. The West Texas Intermediate contract traded on Nymex is typically priced higher than its European counterpart.