Crude Oil Futures Surge for Second Day
After advancing 4% on Wednesday, crude futures jumped another 3.9% on Thursday after the Energy Information Agency reported a decline in inventories at the Cushing, Oklahoma distribution point in the U.S. In addition, increases in demand for gasoline and jet fuel hinted at a possible uptick in economic activity.
Although U.S. commercial crude oil inventories increased by 2.4 million barrels from the previous week, demand for gasoline was up 1.2% from a year ago, demand for distillate fuel was up 15.8% and demand for jet fuel was up 7.3%. With oil demand trending higher ahead of the Memorial Day holiday, the market had reason to believe even higher prices are ahead.
"This selective perception of markets signals a temporary change of mood on the oil market and suggests that prices will rise further in the near term, especially as the U.S. dollar is trending weaker today," said analysts at Commerzbank in a note to investors.
Phil Flynn, an oil analyst with PFGBest.com also believes oil futures may be stabilizing. "We think that oil prices have more to fall long term, but short term we may have found a bottom," he said. "Oil bulls will try to establish a new bottom to the trading range."
Oil futures had dipped below $70 a barrel earlier this week after moving higher than $87 a barrel a few weeks ago.
Flynn said that the price of crude futures would be "guided by the perception of the strength of the global economic recovery."
With the European debt crisis still sorting itself out, sure signs of a strong global recovery are probably still far off.