NEW YORK (TheStreet) -- Oil prices sprung back to positive territory Wednesday morning, after a deep plunge below $80 the day before, as energy traders responded enthusiastically to an unexpected draw in weekly crude oil stocks and the Federal Reserve's latest update on reviving the economy.
West Texas Intermediate light sweet crude oil for September delivery was rising $1.32 to $80.62 a barrel, while the September Brent crude oil contract was popping $2.11 to $104.68.
The Federal Reserve said on Tuesday that it would keep the benchmark interest rate at near-zero levels until mid-2013 in its latest bid to sustain the economic recovery.
"That did not seem like enough at first ... and the DJIA sold off 150 points in the aftermath of the comments," Cameron Hanover analysts noted. "But, that was hardly the full story on Tuesday. It took traders an hour to parse the Fed's comments and, as traders mulled it over, they became more bullish over the Fed's comments.""Ten-year bonds reacted in such a way that traders thought the Fed had achieved QE3 without buying a single bond." The Federal Reserve news overlapped with the Internal Energy Agency's decision to trim its global oil demand forecast for 2011 on concerns of higher prices and slowing economic growth. However, the agency raised its estimate for oil demand growth in 2012 "due to oil-fired power needs in Japan." Meanwhile, the American Petroleum Institute said late Tuesday that there was a large, 5.2 million barrel decline in crude oil inventories in the week ended Aug. 5. Analysts were generally expecting a build of 1.8 million barrels, according to a Platts survey of analysts. The U.S. Department of Energy's weekly update on crude oil inventories is scheduled for 10:30 am ET. "The cup of positive sentiment overfloweth into the crude complex overnight, meaning we approach this morning's weekly U.S. inventory report with hefty gains," commented Summit Energy analyst Matt Smith. Energy stocks were trading in mixed territory. Chevron (CVX) was falling 3.1% to $90.50; Exxon (XOM) was sliding 3.1% to $68.99; Marathon Oil (MRO) was up 0.2% to $25.53; Hess (HES) was tumbling 2.4% to $54.67; Occidental Petroleum (OXY) was losing 3.2% to $81.75; Double Eagle Petroleum (DBLE) was rising 1.3% to $8.46; and Anadarko Petroleum (APC) was declining 2.8% to $66.33. -- Written by Andrea Tse in New York.
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