After strong overnight gains, crude oil futures dipped in Asian trade on Thursday. While U.S. inventory data is set for release and ongoing overseas tensions continue, markets remained volatile. Oil futures on both sides of the Atlantic have fluctuated sharply, largely affected by the dollar and the possibility of a resolution in Ukraine, which would help the demand outlook in Europe.
U.S oil futures slip
On Thursday West Texas Intermediate oil futures fell ahead of the weekly supply data release out of the U.S. later in the session to determine the strength of oil demand. The U.S. is the world's largest oil consumer. Investors await the results, as the report will be released one day later than usual due to Labor Day weekend.
According to Investing.com, on Thursday morning on the New York Mercantile Exchange, crude oil for delivery in October was down 0.89 percent, or 85 cents, to trade at $94.69 a barrel. Prices fell within a narrow range of $94.66 and $95.28 a barrel. Futures were likely to find support at the low from Sept. 3 at $93.06 a barrel. They will find resistance at $95.91 a barrel, the high from September 2.
Oil's decline comes after strong gains. On Wednesday, U.S. oil prices climbed 2.86 percent, or $2.66, to end at $95.54 a barrel after reports that Ukraine and Russia had agreed on a cease fire agreement in eastern Ukraine.
The American Petroleum Institute, an industry group, said that U.S. crude inventories dropped by 545,000 barrels in the week ended August 29, compared to forecasts for a drop of 1.0 million barrels. The report also showed that gasoline stockpiles were up by 362,000 barrels, while distillate stocks rose by 385,000 barrels.
Thursday's government report was predicted to show that U.S. crude oil stockpiles were down by 1.2 million barrels last week, while gasoline stockpiles were forecast to decrease by 1.4 million barrels, reports Investing.com.
Investors are also awaiting Friday's U.S. employment report for August. It's a key factor in deciding where the monetary policy is headed as it shows further indications on the strength of the recovering labor market. Although the U.S. economy has continued to show improvement, Federal Reserve Chair Janet Yellen has hung to concerns over a lagging labor market. Recent reports have signaled for an optimistic outlook over the strength of the economy and increased expectations that the Fed will soon raise rates.
Global oil market
According to Market Watch, Moscow's support for separatists in eastern Ukraine has led France to make threats to stop the delivery of a warship to Russia due next month. There was also skepticism about whether or not the apparent cease fire between Ukraine and Russia was legitimate.
Brent crude for October delivery was down 14 cents to $102.63 a barrel after dipping to a 16-month low on Tuesday and rebounding $2.43 on Wednesday, reports the Economic Times.
U.S. President Barack Obama has called for a more drastic response to counter Islamic State militants after a video of extremists beheading U.S. journalist Steven Sotloff was confirmed authentic.
Howie Lee, investment analyst at Singapore's Phillip Futures said, "WTI and Brent have a resistance of $98.10 and $105.03 respectively and could likely break these levels if tensions continue to escalate," according to Market Watch.
The benchmark gasoline contract, Nymex reformulated gasoline blendstock for October, declined 141 points to $2.6059 a gallon. October diesel fell 134 points at $2.8524.
Analyst Tim Evans at Citi Futures said in a report to Market Watch that the primary source of the Nymex crude market's oversupply has been the cycle of speculative long liquidation. He added that while it's possible for this flow of selling to continue, it will eventually set the stage for a new cycle of buying.
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