LONDON, (Reuters) – Oil pared early gains but held firmly above $82 on Wednesday after official U.S. inventory data showed a larger than expected build in crude stocks.
Front-month crude futures on the New York Mercantile Exchange rose as high as $83.76 after U.S. jobs data, but edged back to trade up 40 cents at $82.77 a barrel at 1530 GMT after inventory data from the Energy Information Administration.
Brent crude for May rose 47 cents to $81.75.
U.S. crude oil stocks rose by 2.9 million barrels to 354.2 million barrels last week, more than the 421,000 barrel build reported by the American Petroleum Institute on Tuesday, while gasoline inventories logged a modest but surprise gain, the EIA data showed on Wednesday.
“On the surface you would think this is a bearish report, especially with gasoline showing an unexpected build,” Mike Zarembski, senior commodities analyst at Optionsxpress in Chicago, said. “But traders are focusing on the weakness in the U.S. dollar today, which is keeping commodity prices in general up.”
The dollar fell against the euro and retreated from a three-month high against the yen after data showed the United States shed private sector jobs this month.
The U.S. shed 23,000 jobs in March, against expectations for a rise of 40,000 private-sector jobs, a report by private employment service ADP showed on Wednesday.
Following the ADP data, the dollar pared gains from a three-month high against the yen, European shares turned negative and copper eased to $7,800 a tonne. “The dollar dropped a little on those ADP numbers. That’s bad news for markets, so the dollar drops, equities drop, commodities drop,” said James Hughes, analyst at CMC Markets.
A weakening dollar normally tends to make commodities priced in the U.S. currency cheaper for investors holding other currencies.
U.S. oil demand in the past few weeks has posted its first year-on-year gain in 18 months, while Chinese imports are surging, reflecting sustained growth for the world’s top two oil users.
After the biggest annual rise in 36 years in 2009, most commodities continued to rebound on general optimism that the economy is recovering and demand for raw materials will continue to improve.
In addition, many commodities have posted strong sales to China, the largest consumer of many goods such as base metals and food staples.
Oil prices this quarter have traded from a peak of $83.95 in January, the highest since October 2008 at the height of the financial crisis, to a low of $69.50 a barrel in February. That sub-$15 range is more stable than the wide price swings in the previous two years. Implied volatility for U.S. crude is now at its lowest level since prices surged to a record $147.27 a barrel on July 11, 2008, before plummeting to $32.40 in December of that year.
OPEC officials meeting in Cancun, Mexico will complete a two-day meeting against a backdrop of price stabilisation around $80 per barrel, but showed no signs of clear consensus on how to respond if prices were to rise further.