Futures erased earlier losses as the dollar fell against 15 of its 16 major counterparts and European equities advanced. Economists expect the U.S. Federal Open Market Committee to announce a second round of asset purchases next week. An Energy Department report yesterday showed gasoline supplies in the U.S. plunged unexpectedly last week.
“The reason we’re still higher than $80 is due to the strength in equities and currencies as well,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. “Recently the dollar has gained more than oil has lost. But it’s a little bit overvalued.”
Crude for December delivery was up 19 cents at $82.13 a barrel in electronic trading on the New York Mercantile Exchange at 11:58 a.m. London time, after falling to $81.82. The contract fell in the past two days after rising to $83.28 a barrel on Oct. 25. Brent crude for December settlement rose 21 cents to $83.44 on the ICE Futures Europe exchange in London.
The dollar weakened against the euro for the first time in three days, slumping 0.6 percent to $1.38504 against the European currency.
“When you look at gold and oil, and to a lesser extent copper, movements are related to the dollar,” said Jonathan Barrat, managing director of Commodity Broking Services Pty in Sydney.
Gasoline Supplies
U.S. gasoline stockpiles dropped 4.39 million barrels to 214.9 million in the week ended Oct. 22, the Energy Department report showed. That’s the biggest decline since Oct. 9, 2009. Supplies were expected to advance by 625,000 barrels, based on the median estimate from 16 analysts surveyed by Bloomberg News.
Distillate fuel inventories, including heating oil and diesel, declined 1.61 million barrels to 168.4 million, the Energy Department said. They were projected to drop 1.5 million barrels, the survey showed.
U.S. crude stockpiles increased 5.01 million barrels to 366.2 million, the largest jump since July, the Energy Department said. A 1 million-barrel build was forecast, according to the survey.
U.S. gross domestic product rose at a 2 percent annual pace in the third quarter, up from a 1.7 percent rate in the previous three months, based on the median forecast in a Bloomberg News poll of economists before a Commerce Department report tomorrow. The U.S. holds mid-term congressional elections on Nov. 2.
“Most analysis shows that into 2011 the oil market will be saturated,” Zambo said. “The general overview is that it’s not a tight supply situation.”
Chart Resistance
Oil in New York is facing resistance at $81.74 a barrel, setting the stage for prices to climb to $87 or fall to $78, based on levels using Fibonacci analysis, according to energy consultants Schork Group Inc. in Villanova, Pennsylvania.
Futures have settled above or below the 76.4 percent retracement level of $81.74 a barrel for 9 of the past 11 trading sessions, Schork Group President Stephen Schork said in a report yesterday. Prices may push to the top of the Fibonacci range at $87.15, near the highest price this year, or drop to $78.40, depending on whether the Federal Reserve decides to buy more government securities.
“This is the textbook definition of sideways trading - what are the markets waiting for?” Schork said in the report. “We are waiting for the FOMC meeting and its implication for the dollar before we place our bets.”
