US stocks turned positive as reassuring same-store sales
forecast from retailer Target pushed consumer stocks higher, with the S&P
500 index rising more than 0.5 percent, dragging other risk assets like oil
with it on hopes that good corporate results reflected improved economic
conditions.
US crude oil futures dipped 27 cents to $75.50 a barrel
by 1:39 p.m. EDT (1739 GMT), having earlier dropped to $73.83, the lowest price
since July 7.
ICE Brent fell 39 cents to $76.54, having flipped into
its biggest premium to the US benchmark in about two months on Tuesday. That
premium narrowed about 15 cents to 65 cents as US crude oil stockpiles began to
ebb.
"You had a pop in equities and that helped crude
bounce off its low," said Richard Ilczyszyn, senior market strategist at
Lind-Waldock in Chicago.
Crude slumped early after data from the US Energy
Information Administration showed combined inventories of crude and refined
products, excluding the Strategic Petroleum Reserve, reached 1.130 billion
barrels last week, topping the 1.127 billion barrels struck in Sept. 1990. On a
monthly basis, inventories peaked at 1.37 billion barrels in 1980. EIA VS API
The EIA data showed a 818,000 barrel drop in US crude stocks, roughly in line
with analysts' forecast for a 1 million barrel drop.
But that contrasted with Tuesday's report from the
industry group the American Petroleum Institute, which said crude oil stocks
rose 5.9 million barrels last week.
"The bearish expectations got out sized on the API
report, and the equity-oil correlation remains intact, as the same sentiment
that raises and dashes expectations for the global economy produces the same
price effects for now," said John Kilduff, partner at Again Capital LLC in
New York.
Oil prices have been stuck in a $65 to $85 trading range
for about the last 12 months as increases in energy demand in emerging markets
has been insufficient to drain ample supplies in other areas in the world.
Crude oil stocks at Cushing in Oklahoma, the delivery
point of US crude fell 687,000 barrels to 37.0 million barrels, but still near
recent high levels.
The high inventories at Cushing helped push North Sea
benchmark Brent crude prices to a premium to US crude. Many investors put their
money on moves of the spread between these crude oil contracts.
The premium of Brent has been around a two-month high
since Tuesday. In the week to Aug. 6, crude oil supplies at Cushing stood at
37.7 million barrels in the week to Aug. 6, just shy of a record 37.9 million
barrels in mid-May.
Also helping keep Brent at a premium to US crude was news
Royal Dutch Shell declared force majeure on its Nigerian Bonny Light oil stream
after a rise in sabotage on its pipelines cut output by up to 100,000 barrels
per day.
