NEW YORK (TheStreet) -- Oil futures broke a five-day losing streak on Wednesday despite news of a bigger-than-expected build in inventory levels.
A sell-off ensued immediately after the government's Energy Information Administration said crude oil stockpiles surged by 4.1 million barrels last week for the week ended Aug. 20. The disappointing demand figure far outpaced projections from Platts calling for a build of 1.1 million barrels.
But the bearish report didn't dampen the market for long, and selling exhaustion eventually translated to a price lift.
The October crude delivery contract, which had been trading flat just before the data's release, dropped sharply soon after. But the contract rebounded to finish in positive territory, ending the day 89 cents higher at $72.52 a barrel."Keep in mind, the market's been down five consecutive days," said Gene McGillian, a broker and analyst at Tradition Energy. "Even though the indicators showing weak fundamentals are continuing to drag prices lower, I think it was well over due for some profit taking." Sluggish economic data abounded on other fronts in the morning, bringing economic recovery fears further to the forefront. Durable goods and new home sales each came in worse than expected for July. And while stocks were weaker in the morning , McGillian also highlighted the late reversal in stocks as lending a hand to crude. The Dow Jones Industrial Average finished the session 20 points higher, or 0.2%, to 10.060. Still, McGillian believes the about-face in crude could be short-lived. "Whether this turnaround has legs is highly doubtful," he continued. "I think the market is still basically reeling from rising economic worries and poor fundamentals from today's inventory report." Gasoline inventories also swelled by another 2.3 million barrels last week, the EIA report said, despite estimates calling for those stockpiles to fall by 875,000 barrels. Another 1.8 million barrels were also added to distillate supply levels last week, which was well beyond the expected 950,000 barrel increase. The October gasoline contract on the Nymex settled at almost $1.83 a barrel, or nearly 2 cents higher, while the October heating oil contract added 3 cents to finish at nearly $1.99 a barrel. Energy stocks weighed on the broader market averages, as the NYSE Arca Oil index and the Philadelphia Oil Service Sector index shed 0.1% and 0.6%, respectively. On the Dow, Exxon Mobil (XOM) shares dipped 0.05%, though Chevron (CVX) gained 0.4%. Elsewhere on the Nymex, natural gas futures for October delivery tumbled 16 cents to $3.90 per million British thermal units. Natural gas watchers will turn to a separate EIA report due for release Thursday morning, which is expected to show storage levels increasing by 37 to 41 billion cubic feet last week. --Written by Sung Moss in New York. >To contact the writer of this article, click here: Sung Moss. >To submit a news tip, send an email to: firstname.lastname@example.org.
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