Oil steady as investors eye job data

Singapore:  Oil was steady near $74 yesterday as investors turned their attention to upcoming US employment reports, following gains of almost three per cent a day earlier after positive manufacturing data lifted spirits across markets.

US crude for October delivery slipped eight cents to $73.83 a barrel by 0704 GMT, after a jump of $1.99 on Wednesday. ICE Brent dipped 33 cents to $76.02.

Manufacturing in top oil consumers the United States and China accelerated in August, reports showed on Wednesday, raising hopes record petroleum stockpiles would fall and reviving confidence across markets.

The focus over the next two days was set to turn to lagging US employment indicators, including weekly jobless claims, on yesterday. The nation's nonfarm payrolls probably fell for a third straight month in August, a Reuters survey showed, ahead of a monthly report due tomorrow.

‘Seeking optimism'

"The market was just seeking optimism and this came from strong manufacturing data," said Serene Lim, a Singapore-based oil analyst at ANZ.

"Some traders started the new month with new positions. It was a buying opportunity, especially for those who were bullish in the long term. However, the market will be in a wait-and-see mode especially before the payrolls report [today]."

US private employers unexpectedly cut 10,000 jobs in August, a report by payrolls processor ADP showed on Wednesday.

But markets shrugged off the negative news from the labour market, after Institute for Supply Management data on Wednesday showed US factory activity rose in August for a 13th straight month.

Investors had been expecting the ISM reading to show a decline in manufacturing from July, which would have fit with recent data showing a slowdown in US growth. Wednesday's rally in oil prices was earlier triggered by data showing China's manufacturing industry accelerated in August

Worries eased

Japan's Nikkei average rose 1.5 per cent yesterday and China's key stock index rose 1.3 per cent, after the US and Chinese manufacturing data eased investor worries about the global economy.

Global stocks posted their biggest percentage gain this summer on Wednesday, in tandem with a broad-based commodities rally.

But oil market fundamentals were not as constructive. US crude stockpiles rose three times as much as expected in the week to August 27, adding 3.4 million barrels.

Distillate supplies fell 739,000 barrels, going against forecasts for an increase and snapping 13 straight weeks of gains, while gasoline inventories declined 212,000 barrels, roughly in line with analyst forecasts, the EIA data showed. EIA statistics showed total US petroleum stockpiles rose last week to a new high of 1.143 billion barrels, up from 1.139 billion the previous week, for the highest inventory levels since at least 1990, when the EIA began tallying weekly stocks data.

"The fundamentals will still weigh down the market," Lim said. "Cushing inventories are still relatively high."

The large build in US total crude stockpiles could deepen the contango in crude markets, when front month futures trade at a discount to later months.

Widest level

The spread between first- and second-month crude oil contracts ended at $1.50, narrowing from $1.60 on Tuesday, which was the widest level since early June.

Tropical Depression Nine in the eastern Atlantic Ocean strengthened into Tropical Storm Gaston on Wednesday as it continued on a westerly path that could head for the Caribbean.