Oil's upside was limited during early trading on the New York Mercantile Exchange Wednesday as the greenback recovered from 15-month lows. However, strong economic news out of the world's second largest consumer led to a pickup in purchasing for the energy commodity, with prices rebounding back near $79 a barrel.
Climbing to the higher end of its current trading range today, the price of light, sweet crude oil for December delivery moved into positive territory to settle at $79.28 on the NYMEX, a slight gain of 23 cents from yesterday's final price tag.
Additionally, natural gas futures took their cue from the stock market's rally Wednesday, closing higher at $4.503 per thousand cubic feet after Tuesday's steep loss.
"Once again oil prices reject $80 a barrel and are having a difficult time staying above that level despite the fact of strong economic news out of China this morning," noted Phil Flynn, vice president in charge of research for PFG Best in Chicago.
"But prices are not backing off that much," the analyst added. "We're still locked in a range between $81 and $77 and we're going to stay that way for the foreseeable future."
Bullish News from China, OPEC Outweighs Inventories
Helping to support a stronger crude price, preliminary customs data released today revealed that China's October crude oil imports rose 19.7% from 2008 to 19.34 million tonnes, or 4.55 million barrels per day.
Moreover, the Organization of Petroleum Exporting Countries (OPEC) slightly raised its demand growth forecast for next year by 100,000 barrels per day from October, with consumption seen rising around 750,000 bpd.
"Everybody talked about the excitement of the industrial production number that we saw coming out of China. That gave the market a boost, pushing us above $80 a barrel, but [investors] have a hard time maintaining that because they believe $80-a-barrel oil would mean that we'll see more oil out of OPEC," Flynn observed.
"That's probably what's bringing prices back down -- the market is concerned that the high cost of oil may actually slope demand," he said.
Adding to Wednesday's choppy trading, the American Petroleum Institute released a bearish inventory report late Tuesday showing crude stocks up more than expected, as well as additional builds in products inventories.
Due to Wednesday's federal Veterans Day holiday, the U.S. Energy Information Administration will not issue its inventory report until tomorrow morning, but Reuters predicts crude supplies will be up by 600,000 barrels and distillate stocks down by 700,000 barrels.
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