Oil futures edged higher Thursday, as buyers re-emerged one day after the steepest selloff of the year.
Light, sweet crude for December delivery settled 65 cents, or 0.8%, higher at $85.09 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled 43 cents, or 0.4%, higher at $107.25 a barrel.
Futures recouped some ground following Wednesday's 4.8% plunge, which followed a report from the Energy Information Administration that said oil and gasoline stockpiles rose sharply last week as Hurricane Sandy squelched fuel demand.
"I think it's a little bit of a bounce off yesterday's terrific selloff," John Kilduff, founding partner at Again Capital in New York, said of the day's gain.
Prices also got a boost Thursday from a government report that indicated modest improvement in the U.S. labor market. The number of new jobless claims last week decreased by 8,000 to a seasonally adjusted 355,000, the Labor Department said. The figures, however, were likely skewed by the impact of Hurricane Sandy.
The report comes less than a week after the department said nonfarm payrolls in October rose by a seasonally adjusted 171,000 jobs--the latest sign that the U.S. economy appears to be on the mend, albeit slowly.
But oil traders are hesitant to push prices too much higher, as new worries come into focus following the U.S. presidential election. A possible fiscal impasse later this year, concerns over the fate of the European Union and uncertainty over Iran's nuclear program all continue to weigh on market sentiment.
Unless Congress acts, a multibillion-dollar package of spending cuts and tax hikes is set to kick in at the end of the year. Market observers are concerned that the measures could plunge the country back into a recession, which would curb oil demand and likely send prices tumbling.
"Everybody's still a bit suspicious about the ability of Republicans and Democrats to get along into the new year," said Bob Yawger, director of energy futures at Mizuho.
Wednesday's decline sent oil prices to their lowest level since July. The rout accelerated a decline that has gripped the crude market in recent months, due largely to rising supplies in the U.S., persistent economic weakness there and signs of slackening demand from emerging markets like China.
Analysts say that these broader issues have overshadowed concerns about the Middle East in recent months. Oil prices were little moved by reports Thursday that Iranian fighter jets fired on an unmanned U.S. drone earlier this month. The drone was flying over international waters and was fired upon by two Iranian fighter planes.
"We're just so focused on the diminishing economy and the demand outlook," Mr. Kilduff said. "The geopolitical premium is just not getting any kind of reaction these days."
Front-month December reformulated gasoline blendstock, or RBOB, settled 1.84 cents, or 0.7%, higher at $2.6073 a gallon. December heating oil settled 0.67 cent, or 0.2%, lower at $2.9554 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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