Oil prices rebound early Thursday on weaker US$ despite big US stock build

International Brent crude oil futures were trading at US$49.54 per barrel at 0043 GMT (8.43 a.m. Malaysian time), down 38 cents from their previous close. U.S. West Texas Intermediate (WTI) crude futures were down 43 cents at $47.21 a barrel. (An oil storage tank is seen at the oil field of Zubair, in Basra, Iraq, August 27, 2016. - REUTERS)

SINGAPORE: Oil prices rose in early Asian trade on Thursday, rebounding on a weaker U.S. dollar after falling around 3 percent or more in the previous session following a surprisingly large build in U.S. crude and distillate stocks last week.

"The weaker dollar is providing support for oil prices today. The direction of oil prices is governed by supply and the strength of the dollar," said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance.

The U.S. dollar index slipped against a basket of currencies on Thursday. A weaker dollar makes greenback-denominated commodities including oil cheaper for holders of other currencies.

U.S. crude futures had climbed 12 cents to $44.82 a barrel by 2025 EST, after falling $1.65, or 3.6 percent, in the previous session.

Brent crude futures climbed 10 cents to $46.99 a barrel after settling $1.33 lower, or 2.8 percent, at the previous close.

That came after U.S. crude inventories rose 2.3 million barrels to 1.221 billion barrels in the week to Aug. 26, data from the Department of Energy's Energy Information Administration showed on Wednesday. That compared with analyst expectations of a 921,000-barrel increase.

Distillate stocks, which include diesel and heating oil, unexpectedly rose by 1.5 million barrels, while gasoline inventories fell by 691,000 barrels, about half the forecast drawdown.

"In the absence of any price shocks, oil prices remain rangebound - as soon as oil gets down to the lower end of $40 a barrel prices find support. When oil gets down to $40-$42 investors buy, when it gets to $48-$50 they sell again", Barratt said.

Speculation the Organization of the Petroleum Exporting Countries and other oil producers might agree to curb output at talks in Algeria later this month helped fuel an 11-percent rise in crude prices in August, the best monthly return since April.

But optimism of an output freeze has since waned.

"The market is very complacent on whether OPEC can come up with a supply freeze deal. The market doesn't believe OPEC has the ability to achieve an agreement freezing supply," Barratt added.

Investors are also waiting for U.S. non-farm payroll data on Friday to give the market direction, ANZ Bank said in a note. - Reuters

Earlier report:

Oil price tumbles on US inventory builds

NEW YORK: Oil prices fell 3 percent or more on Wednesday, paring their big gains for August, after government data showed a large surprise weekly build in U.S. crude and distillate stockpiles and a smaller-than-expected drawdown in gasoline.

Crude futures rose as much 11 percent in August, posting their best monthly return since April, helped by speculation that the Organization of the Petroleum Exporting Countries and other oil producers might agree to curb output at September talks in Algeria.

But oil also fell this week as the dollar rallied and expectations for an OPEC-led production freeze fizzled. Wednesday's supply-demand data from U.S. Energy Information Administration (EIA) could herald a more bearish trend, analysts said.

The EIA said crude stockpiles rose for a second straight week, building by 2.3 million barrels last week, compared with analysts' expectations for a rise of 921,000 barrels.

Distillate stocks, which include diesel and heating oil, unexpectedly rose 1.5 million barrels, while the gasoline inventory drop of 691,000 barrels was about half the drawdown forecast. [EIA/S]

"I would call this the trifecta of bearish news," said Tariq Zahir, a trader in WTI timespreads at Tyche Capital Advisors in New York.

"We should be getting draws for this time of year. Not only are we getting shocking builds, we're also being squeezed by the bullishness of the U.S. dollar and a hurricane season that's had very little impact thus far on actual crude production."

Brent crude futures settled down $1.33, or 2.8 percent, at $47.04 per barrel. It rose nearly 11 percent for August.

U.S. crude's West Texas Intermediate (WTI) futures fell $1.65, or 3.6 percent, to close at $44.70. It gained more than 7 percent for the month.

"We had a short on WTI this morning at $46 and we took the money and ran," said Phil Davis, trader at PSW Investments in Woodland Park, New Jersey.

The market has paid little heed so far to risks of storm damage to oil and gas installations in the U.S. Gulf of Mexico. The U.S. government said on Wednesday that an estimated 19.5 percent of crude equivalent production in the Gulf had been shut due to a tropical depression.

Traders expect further pressure on oil if the U.S. jobs data for August, due on Friday, show sharp employment gains that could bump up the dollar , which hit three-week highs on Wednesday. [FRX/]

"It’s a one-way trip, and that is down" for oil, Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, told the Reuters Global Oil Forum, predicting sub-$40 levels in the next two weeks.- Reuters