Oil prices halt decline after 5.8% drop in two days
Crude oil prices edged higher Wednesday after two days of losses, as the market focused on upbeat U.S. economic data and a sharp drop in gasoline inventories.
Oil futures for May delivery added 86 cents to $107.11 a barrel in New York after falling a total of $6.54, or 5.8% in the previous two sessions.
The pullback in crude on Monday and Tuesday had been fueled in part by fears that prices had reached levels that were likely to significantly slow gasoline demand and economic growth.
The International Energy Agency warned Tuesday that “there are real risks that a sustained $100-plus price environment will prove incompatible with the currently expected pace of economic recovery.”
Also, Goldman Sachs late Monday advised clients to take profits in key commodities after the surge of the last seven months.
Prices of some raw materials, including copper, cotton and sugar, continued to slide Wednesday.
But oil may have been helped by the government’s report on March retail sales. Although overall sales rose 0.4% from February, slightly less than expected, sales excluding gasoline and autos were up 0.6%.
The government also revised up its retail sales growth figures for January and February.
“The crude oil shock hasn’t seemed to take much wind out of retail sales thus far,” said Michael Darda, economist at MKM Partners in Stamford, Conn.
The Federal Reserve's latest report on regional economic conditions also painted a picture of an economy continuing to improve, albeit at a "moderate" pace.
On the supply side, the Energy Department’s weekly report on U.S. energy inventories showed gasoline supplies plunged seven million barrels last week, to 209.7 million, the biggest drawdown in 12 years, according to Bloomberg News data.
The drop partly reflected that more refineries were idled for seasonal maintenance, traders said.
Even as gasoline supplies fell, U.S. crude oil inventories rose 1.6 million barrels to 359.3 million, the sixth straight weekly rise.
Many analysts have maintained that, despite the Middle East unrest that has roiled energy markets this year, prices reflect a large "speculative premium" rather than actual supply problems.
Estimates from Goldman Sachs analysts suggest that speculators have boosted crude's price by as much as $27 a barrel in the recent run-up.
-- Tom Petruno