Under pressure during earlier trading on the New York Mercantile Exchange today, the price per barrel of crude oil ultimately defied bearish underlying fundamentals to close higher after news of a slight decline in U.S. crude inventories and a drop in the greenback's value helped boost trading for the energy commodity.
The price of light, sweet crude for December delivery soared above its current $80-threshold by mid-morning Wednesday, but settled just below that at $79.58 at the end of the session, still gaining 44 cents from yesterday's final price tag.
Spurring investors away from purchasing the energy commodity early today, the U.S. dollar rallied to its highest level in three weeks but lost ground in late trading, helping to push crude futures back into positive territory. Additionally, Wall Street hit a snag on less than stellar homebuilding data, but oil prices rallied at the end of the day in spite of a sliding stock market.
"The dollar continues to slide and as long as you have that factor in the market, it's going to be tough for oil prices to move any lower," said Gene McGillian, analyst and broker at Tradition Energy in Stamford, Connecticut.
Market Unable to Shake Off Still-Bearish Inventories
The Department of Energy released its weekly inventory report today, which showed domestic crude stocks down 900,000 barrels to 336.8 million barrels last week. Although declines in record-high inventories typically bodes well for the energy market, the drawdown in crude stocks was less than the 4.4 million-barrel drop reported by the American Petroleum Institute on Tuesday.
"The market didn't get a confirmation of a big decline in crude oil stocks that it was looking for," McGillian contended. "That basically kept the market from pushing through $80 and being able to hold those levels."
"The market did made an attempt to break above $80 after the report came out," McGillian continued, "but when you look at the information released by the Department of Energy, it really wasn't a bullish report, and if anything it continues to point to the bearish fundamentals that underlie the market."
Natural Gas Comes Under Pressure
Plunging from a recent stay near the higher end of its trading range closer to $5, natural gas futures closed drastically lower to $4.254 per thousand cubic feet on the NYMEX Wednesday, establishing a new low for the December contract.
"Natural gas prices are getting more volatile, and I think this week's trading is a good example of that," McGillian noted. "The market has basically made a 10% swing both up and down in price, and it seems as if these prices are reflecting a very weather-driven market."
He explained, "Today you saw updated weather forecasts that continue to indicate that we'll see above-average temperatures in the Midwest and Northeast of the United States for December and January. And with storage levels at record highs, it's a growing possibility that we'll have two -- if not three -- more injections in storage, which has put pressure on the natural gas market."
Most Popular Articles
From the Career Center
Jobs that may interest you