Oil Rallies, Edges Off Highs

Oil Rallies, Edges Off Highs

NEW YORK (DTN) -- New York Mercantile Exchange oil futures rallied to near one-week highs on a hurricane in the Atlantic Ocean and data from China Thursday morning, but eased from those highs after the Labor Department said jobless claims in the United States rose by a more-than-expected 10,000 to 277,000 in the week-ended Sept. 26.

Initial claims remain low at below 300,000 however, and analysts expect Friday's September payroll report to show continued jobs growth as the domestic economy remains resilient despite sluggishness overseas. Still, the increase in claims undermined investor confidence as regular trading gets underway.

The oil futures complex had rallied overnight as market sentiment was boosted by Chinese economic data considered not-so-bad, with a storm in the Atlantic Ocean providing additional support for the energy complex.

Fear of worsening conditions in China was averted when manufacturing index compiled by the Chinese Federation for Logistics and Purchasing showed an increase to 49.8 in September from August's 49.7 but below July's 50 reading that indicates contraction.

The August index was the lowest since August 2012, and so the increase for September was seen as indicating potential stabilization of China's economy that has been slowing down this year.

At 9:00 AM ET, NYMEX November WTI crude futures surged 92cts at $46.01 bbl, off a four-day high of $46.32. ICE November Brent crude futures were 71cts higher at $49.08 bbl, off a one-week high of $49.47.

In products trade, NYMEX November ULSD futures climbed 2.41cts to $1.5615 gallon, off a one-week high of $1.5764. NYMEX November RBOB futures rallied 3.82cts to $1.4049 gallon, off a one-week high of $1.4124. October products contracts expired Wednesday afternoon.

On Wall Street, U.S. stock indices rallied with the dollar index falling off a three-day high on risk-on trade after better-than-expected data from China and worse-than-expected weekly U.S. jobless claims data.

China's economic growth held steady at 7% in the second quarter, the weakest since 2008. Beijing hopes to maintain that growth rate for the rest of the year but many economists doubt the target will be met.

The Chinese data spurred an appetite for risk taking, and comes ahead of manufacturing data for the United States due out later this morning that is expected to further lift market sentiment.

The Institute for Supply Management is set to issue its manufacturing index at 10:00 AM ET, with estimates calling for a drop to 50.5 in September from 51.1 in August. September nonfarm payrolls are expected to have increased by 200,000 jobs, with the Bureau of Labor Statistics set to release the report on Friday.

In the Atlantic Ocean, Hurricane Joaquin gained strength as it bore down on the Bahamas early this morning, packing sustained winds of 120mph. Joaquin was updated to a Category 3 storm, and is now picking up speed with wind strength extending out 35 miles, the National Hurricane Center said. There's a chance it could reach the East Coast along North Carolina and Virginia on Sunday, NHC said.

Oil data issued Wednesday by the Energy Information Administration showed domestic crude oil and gasoline stocks increased by 4.0 million bbl and 3.3 million bbl, respectively, during the week-ended Sept. 25. Domestic crude production declined 40,000 bpd to 9.096 million bbl EIA showed, the lowest output rate since late November 2014.