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Crude oil rises above $74 on strong US equities
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Brent premium to US crude touches highest since mid-May
LONDON: Oil rebounded on Wednesday, reversing losses earlier in the day, after US equities rose. Traders attributed oil's boost as Wall Street opened to the strong correlation for much of this year between oil prices and equities, saying they are both asset classes that rise when risk appetite increases on hopes of economic recovery.
James Hughes, analyst at CMC Markets in London, said: "It's very hard to break this risk-on, risk-off pattern. Everything at the moment is going the same way, and over the next few weeks it's very hard to look at what will break assets out of this swing -- not just in oil but in everything."
US crude for October was up 20 cents to $74.29 a barrel by 1434 GMT, having earlier hit a low of $73.37.
The market is awaiting the release of weekly US industry and government statistics on oil inventories, delayed by a day following Monday's Labor Day holiday in the United States.
"Last week's data was a bit weak and this week will be interesting as it will reflect what happened just ahead of the Labor Day weekend," Christophe Barret, an oil analyst at Credit Agricole, said.
US crude was trading at a steep discount of $3.34 to futures based on the European Brent benchmark. The gap reached a peak of $3.91 earlier in the day, its highest since mid-May. Brent was 10 cents down on the day at $77.64.
Eugen Weinberg, commodities analyst at Commerzbank in Frankfurt, said US crude's discount to Brent was "definitely due to investment outflow, weaker demand, and high oil inventories (in the United States)."
Total US petroleum stockpiles are at their highest since weekly records began in 1990.
Maintenance at North Sea fields and a strong Urals crude market have also contributed to Brent's premium. However, US crude inventories probably fell for the first time in three weeks last week, down by a moderate 600,000 barrels, as refineries reduced imports in preparation for stormy weather, according to a Reuters poll on Tuesday. -Reuters
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