Oil prices rise on optimism over solid US fuel demand
Updates prices, adds China PMI in paragraph 12, economic stimulus in paragraph 13, analyst comment and context on Israel strikes in paragraphs 16-18
By Yuka Obayashi and Colleen Howe
TOKYO/BEIJING, Oct 31 (Reuters) -Oil prices rose on Thursday, extending the previous day's rally, driven by optimism over U.S. fuel demand following an unexpected drop in crude and gasoline inventories, while reports that OPEC+ may delay a planned output increase offered support.
Brent crude futures LCOc1 gained 47 cents, or 0.65%, to $73.02 a barrel by 0505 GMT. U.S. West Texas Intermediate crude futures CLc1, which are set to expire later in the day, climbed 43 cents, or 0.63%, to $69.04 per barrel.
Both contracts rose more than 2% on Wednesday, after falling more than 6% earlier in the week on the reduced risk of a wider Middle East conflict.
U.S. gasoline stockpiles fell unexpectedly in the week ending Oct. 25 to a two-year low on strengthened demand, the Energy Information Administration said, while crude inventories also posted a surprise drawdown as imports slipped. EIA/S
Nine analysts polled by Reuters had expected an increase in gasoline and crude inventories.
"The surprise decline in U.S. gasoline stockpiles provided a buying opportunity as demand appeared stronger than anticipated," said Toshitaka Tazawa, an analyst at Fujitomi Securities.
"Expectations of a potential delay in the OPEC+ production increase were also supportive ... If they do delay, WTI could recover to the $70 level," he said.
Reuters reported OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies such as Russia, could delay a planned oil production increase in December by a month or more because of concern over soft oil demand and rising supply.
The group is scheduled to raise output by 180,000 barrels per day (bpd) in December. It had already delayed the increase from October because of falling prices.
A decision to postpone the increase could come as early as next week, two OPEC+ sources told Reuters.
OPEC+ is scheduled to meet on Dec. 1 to decide its next policy steps.
Manufacturing activity in China, the world's biggest oil importer, expanded in October for the first time in six months, suggesting that stimulus measures are having an effect.
Markets are awaiting the results of the U.S. presidential election on Nov. 5 as well as further details of China's economic stimulus. Reuters reported that China could approve the issuance of over 10 trillion yuan ($1.4 trillion) in debt over the next few years on the last day of its Nov. 4-8 parliamentary meeting.
In the Middle East, Lebanon's prime minister expressed hope on Wednesday that a ceasefire deal with Israel would be announced within days as Israel's public broadcaster published what it said was a draft agreement providing for an initial 60-day truce.
The push for a ceasefire for Lebanon is taking place alongside a similar diplomatic drive to end hostilities in Gaza.
But the market impact is likely to be muted.
"Most of the Middle East geopolitical risk was stripped out of the oil price after Israel's response to Iran over the weekend," IG market analyst Tony Sycamore said.
Iran said that Israeli strikes on Saturday, in retaliation for Iran's Oct. 1 attack on Israel, caused only limited damage.
Reporting by Yuka Obayashi and Colleen Howe; Editing by Sonali Paul and Sherry Jacob-Phillips
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
