Oil prices partially recovered from yesterday’s falls when the commodities got hit by an update from the Energy Information Administration (EIA). While the Department of Energy (DoE) said that oil stockpiles unexpectedly decreased by 3.9 million barrels last week, which was an even larger fall than the 2.2 million barrel draw reported by the American Petroleum Institute (API) on Tuesday, the EIA said that gasoline stockpiles were up 2 million barrels, which was a greater than expected increase, while distillate stocks rose by 0.4 million barrels instead of the decline of 1.8 million barrels projected by Platts.
This highlighted the declining demand for heating oil, which was the main driver behind oil’s recent rally, which saw crude futures reach nearly US$84/barrel. As the unexpectedly cold weather eased, the demand fell, leading to a considerable decline in crude prices.
The demand outlook got little help from the recent declines in global stock markets, which were weakened by China’s moves to tighten its monetary policy and curb economic growth in the country along with US President Barack Obama’s plan to crackdown on risk taking in the banking sector.
Yesterday’s weekly jobless claims update, which showed a lesser than expected decrease of 470,000 for the previous week, further dented sentiment.
The prices were supported by today's strnegth in European stock markets. Today's US Q4 GDP update will impact further movements in the commodity markets.
Brent Crude for March delivery last traded at US$72.19/barrel, while US light, sweet crude improved to US$73.68/barrel.
Most blue chip oil and gas companies rose today. Shell (LSE: RDSB) took the lead with a 1.4% advance, while fellow supermajor BP (LSE: BP) gained less than 1%, as did Tullow Oil (LSE: TLW). BG Group (LSE: BG) also did well, tacking on 1.2%.
Cairn Energy (LSE: CNE) was unmoved, as was Petrofac (LSE: PFC), while fellow engineering firm Amec (LSE: AMEC), which announced the acquisition of project services consultancy Currie & Brown, added slightly less than 1%.
Midcaps were mixed. Melrose Resources (LSE: MRS) led the sector in the FTSE 250, advancing 3.5% and Dragon Oil (LSE: DGO) was a distant second with a 1.5% climb. Heritage Oil (LSE: HOIL) and Salamander Energy (LSE: SMDR) posted small gains and JKX Oil & Gas (LSE: JKX) and Soco International (LSE: SIA) remained around the opening levels.
Premier Oil (LSE: PMO) was at the bottom of the pile with a 1.2% loss, while Dana Petroleum (LSE: DNX) followed with a decline of less than 1%.
Services companies Wood Group (LSE: WG) and Wellstream Holdings (LSE: WSM) added less than 1%.
Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) and Western Europe operating oil and gas company Northern Petroleum (AIM: NOP) led the small caps with gains of 6% and 5% respectively.
Irish oil and gas exploration company Petroceltic International (AIM: PCI) and energy investor Xtract Energy PLC (AIM: XTR) headed in the opposite direction, shedding 6%.