Oil prices stable as traders mull sentiment and fundamentals

02 September 2010

Prices largely unchanged as economic data balances out future fears

Oil prices remained largely stable during the week ended 2 September as fears over the US economy continued to weigh against relatively robust demand.

The US’ benchmark October West Texas Intermediate (WTI) contract was trading at $73.94 a barrel on 2 September, up around $0.50 from seven days earlier when it was valued at around $73.42.

In Europe, the October Brent contract had gained more than $1.20 from a week before, climbing to $75.80 a barrel.

The biggest gainer of the week was the 12-crude basket of exports from the member states of the international oil cartel Opec, which averaged $72.49 a barrel on 1 September, the last time prices were available for. It was up $2.80 a barrel from $69.69 a barrel on 25 August.

The lack of movement in the US contract, which is used as a global benchmark for prices, in particular, was a sign at the lack of clarity traders have over both the future of oil demand and the wider economy, analysts say.

Analysts at Barclays Capital, the investment arm of the UK bank, argue that fears over the future are counterbalancing positive economic data coming out of the US, which show marked improvements in both housing prices and consumer confidence.

“Until some sense of optimism returns, the destiny of oil prices is unlikely to lie in the hands of market fundamentals alone as the battle between underlying data and sentiment continues unabated,” they say in a 1 September report.

However, the latest report from the US’ Energy Information Administration shows that stocks of crude oil in the US, the world’s biggest consumer, remain near record highs.

In a 1 September report, the agency says inventories of crude oil had risen by 3.4 million barrels in the week to 24 August to a near-record high of 361.7 million barrels. Stocks are currently more than 18.3 million barrels above their 2009 levels.

Gasoline inventories fell by 200,000 barrels at the same time to 225.4 million barrels, although they remain 20.3 million barrels over 2009 levels.

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