Yesterday’s crude oil inventories data from the American Petroleum Institute (API) showed a huge gain of 4.4 million barrels, which, however, did not have much of an impact on commodity markets as crude futures kept rising.
The API report also revealed a decline of 4.06 million barrels in motor fuel stockpiles, offsetting the effect from the buildup in oil inventories.
Oil prices are driven by a strong upward movement in equity markets, which have been buoyant with the S&P 500 and NASDAQ indexes in the US adding more than 2% on Tuesday, while the FTSE 100 advanced 0.8% today.
The rally in the stock markets was triggered by the Bank of Japan’s decision to cut its interest rates from 0.1% to a range between 0 and 0.1%, increasing the likelihood that the Federal Reserve will follow suit and go for more quantitative easing.
The anticipation of further stimulus measures from the Fed has weakened the US dollar, which has been on decline against the euro. The EUR/USD rate hit 1.384 today.
A weaker greenback makes dollar denominated commodities such as crude cheaper for holders of other currencies, lifting demand.
Investors are now looking to Friday’s key US non-farm payrolls data, which will determine further market direction.
Today’s ADP employment report failed to match projections, showing that 39,000 jobs were eliminated in the private sector last month, while analysts expected an increase.
Brent Crude advanced to US$84.68/barrel.
BP (LON:BP) posted a small gain, while fellow supermajor Shell (LON:RDSB) advanced 1.2%. Cairn Energy (LON:CNE) climbed 1.65%.
BG Group (LON:BG) was sitting just below the opening level and Tullow Oil (LON:TLW) dropped 1.1%.
Oil and gas engineering firms Amec (LON:AMEC) and Petrofac (LON:PFC) added 0.5% and 2.3% respectively.
Heritage Oil (LON:HOIL) led the midcaps, advancing 6%. Salamander Energy (LON:SMDR) and Melrose Resources (LON:MRS) rose 2.5% and 2% respectively. Dragon Oil (LON:DGO) climbed 1%.
Soco International (LON:SIA) tacked on less than 1%.
JKX Oil & gas (LON:JKX) moved in the opposite direction, sliding 1.2%. Premier Oil (LON:PMO) declined marginally.
Dana Petroleum (LON:DNX) was flat.
Wood Group (LON:WG) added 1%, while another services company Wellstream Holdings (LON:WSM) dipped 3.2%.
EU operating oil and gas producer and explorer Mediterranean Oil & Gas (LON:MOG) was the leading performer in the sector, soaring 32%. Iraq focused producer Gulf Keystone Petroleum (LON:GKP) advanced 7%.