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Brent Crude Futures Rise From 4-Year Low; WTI Oil Rebounds

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Brent crude climbed from the lowest level in almost four years on speculation prices decreased more than justified. West Texas Intermediate rebounded after falling below $80 for the first time since June 2012.

Futures advanced as much as 1.2% in London after falling below $83 for the first time since November 2010. Crude has tumbled on concern that a global supply glut is forming. Gasoline rose after U.S. government data showed that stockpiles of the fuel slipped last week as demand increased.

“The market is exhausted after a tremendous decline,” Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone. “We’re not moving on fundamentals at the moment. This is a probably a brief technical recovery.”

Brent for November settlement, which expires today, increased 97 cents, or 1.2%, to $84.75 a barrel on the London-based ICE Futures Europe exchange at 12:59 p.m. in New York. Futures earlier reached $82.60, the lowest since November 2010. The more-active December contract climbed 2.4% to $86.10. The volume of all futures traded was 17% above the 100-day average for this time of day.

WTI for November delivery gained 96 cents to $82.74 a barrel on the New York Mercantile Exchange. It earlier touched $79.78, the least since June 29, 2012. Volume was 48% higher than the 100-day average.

The 14-day relative strength index for Brent was 15.0892 today and has been below 30 since Sept. 30, according to data compiled by Bloomberg. An RSI below 30 typically signals a market is oversold. The RSI for WTI stood at 23.8582.

Gasoline Supplies

Gasoline supplies dropped 3.99 million barrels to 205.7 million last week, an Energy Information Administration report showed today. Stockpiles were projected to have fallen by 1.7 million barrels, according to the median of 11 analyst responses in the Bloomberg survey.

Consumption of the motor fuel rose 1% to 8.72 million barrels a day averaged over the last four weeks, EIA data show.

“The gasoline draw is putting the on the market for the moment,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “That was a bigger than expected decline in supply and demand over the last four weeks is up strongly.”

November gasoline futures climbed 4.59 cents, or 2.1%, to $2.1946 a gallon on the Nymex. It touched $2.1347 before the report’s release, the lowest intraday level since Nov. 24, 2010. Crude Stockpiles

Regular gasoline at U.S. pumps fell to the lowest level since February 2011. The average retail price fell 1.4 cents to $3.163 a gallon yesterday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.

Crude stockpiles rose 8.92 million barrels last week, the biggest gain in six months, according to EIA, the Energy Department’s statistical arm.

Oil has slipped into a bear market as shale supplies boost U.S. output to the highest level in almost 30 years amid signs of weakening global demand. The largest Organization of Petroleum Exporting Countries producers are responding by cutting prices, sparking speculation that they will compete for market share rather than reduce supply.

Crude’s collapse is just about over, according to some of the world’s largest banks. Crude will trade above $80 a barrel, Bank of America Corp. and BNP Paribas SA predict, while Commerzbank AG sees that level as a possible low for Brent. They’re in part counting on OPEC to reduce output, possibly as soon as next month, to compensate for shrinking demand.

OPEC, which supplies about 40% of the world’s crude, is increasing production even as demand growth falters. The group pumped 30.935 million barrels a day in September, the most since August 2013, according to a Bloomberg survey. The gain was led by Libya, where output climbed by 280,000 barrels a day to 780,000, the fifth straight increase.

Oil ministers from Kuwait and Algeria have dismissed possible output cuts as the market’s slump prompted Venezuela last week to call for an emergency OPEC meeting. The group is scheduled to gather on Nov. 27 in Vienna.

–With assistance from Grant Smith in London.

Check out Saudis Sitting Pretty in Global Oil Price Plunge on ThinkAdvisor.


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