London Commodity Markets | Oil futures hold to gains, off session highs

SAN FRANCISCO — Crude-oil futures held on to their advance Monday, with support from U.S. manufacturing data that showed a surprising expansion in September.

 

Prices ended off session highs, however, and were easily outpaced by natural-gas futures, which ended nearly 5% higher on expectations of colder weather ahead. Natural gas settled at its highest since early December.

 

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Crude for November delivery (US:CLX2) rose 29 cents, or 0.3%, to $92.48 a barrel on the New York Mercantile Exchange. That was oil’s highest settlement in a little over a week.

Prices traded as high as $93.33 a barrel earlier, according to FactSet.

 

Investors had been hopeful that the U.S. manufacturing index would not contract further, expecting data to point to a level just below expansion.

Instead, the Institute for Supply Management’s manufacturing gauge rose to 51.5, up from 49.6 in August and the highest reading since May. A figure of less than 50 indicates contraction. Economists surveyed by MarketWatch had expected the gauge to come in at 49.7 in September. See: U.S. ISM index turns positive.

Oil also held to gains after Federal Reserve Chairman Ben Bernanke talked about the latest round of monetary easing, taking on critics of the move. See: Bernanke defends QE3.

Even before Bernanke spoke, however, gains for oil had started to fade. “Oil enjoyed the risk-on mode this morning, but the fundamentals are not there for oil to rally right now,” said James Cordier, a portfolio manager with Optionsellers.com in Florida.

Demand for oil is too light to sustain rallies, hence the swift bouts of profit-taking that have accompanied higher oil futures prices in recent sessions, he added.

Monday’s gains for oil follow a tough September — but a standout quarter — for crude. Crude futures lost 4.4% last month but gained 8.5% in the third quarter, the highest three-month return since the fourth quarter of 2011.

The Monday advance follows subdued trading during Asian and European markets, a performance marred by mostly negative manufacturing data reported out of Europe and Asia. See: Euro-zone manufacturing PMI confirms contraction and China manufacturing contracts for second month

Japan’s weak business sentiment also weighed, with a survey from the Bank of Japan showing sentiment at large Japanese manufacturers deteriorating in September.
The ICE dollar index (US:DXY), which measures the greenback against a basket of six major currencies, fell to 79.829 from 79.922 late Friday, adding a layer of support for crude and other dollar-denominated commodities.

Meanwhile, analysts at JBC Energy said money managers cut their “long” bets, or expectations, that oil prices will go higher. Citing data from the Commodity Futures Trading Commission, they said net “long” positions were at their lowest since mid-August.

Source: articles.marketwatch.com

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