Oil jumps 3 percent as short-covering pushes U.S. crude firmly over $40
By Barani Krishnan
NEW YORK (Reuters) - Oil prices rose nearly 3 percent on Thursday, with U.S. crude advancing firmly above the $40-per-barrel mark on short-covering and after a modest stockpile drop at the delivery hub for U.S. crude futures.
It was a second straight day of gains for crude futures from April lows below $40, after Wednesday's 3 percent run-up powered by data showing a hefty U.S. gasoline inventory drawdown.
Market intelligence firm Genscape reported that stockpiles at the Cushing, Oklahoma delivery hub for U.S. crude futures fell 89,071 barrels during the week to Aug. 2, traders who saw the data said. The Genscape report came after U.S. government data on Wednesday showed a 1.1 million-barrel decline at Cushing in the week to July 29.
Sources said BP PLC (BP.L: Quote) was restarting units at its 413,500-barrel per day refinery in Whiting, Indiana, and that added momentum to the crude rally, according to traders. The weekend outage of the reformer and blending oil unit had prompted BP to cut production by between 20 and 25 percent.
Brent crude LCOc1 settled up $1.19, or 2.8 percent, at $44.29 a barrel.
U.S. West Texas Intermediate (WTI) crude CLc1 rose $1.10, or 2.7 percent, to settle at $41.93 per barrel. In the previous session, it rose 3 percent, after settling below $40 on Tuesday, the first time since April.
"We're sitting pretty, with our customers extremely happy at having profited from WTI option hedges at under $40, and are now long again for $45-$55 levels," said Salvatore Recco, who advises on some $2 billion of client money at Gravity Investments in Denver, Colorado.
Before the slump below $40, speculators, including hedge funds, added the equivalent of 56 million barrels of extra short positions in the three main Brent and WTI futures and options contracts in the week ending July 26. Continued...