Oil Recovers A Bit After A Major Tumble

Oil took a major plunge on Tuesday to trade below $94.00 but recovered by 56 cents this morning to trade at 93.94. Traders took advantage of the huge fall in prices to buy up the cheap commodity as the US dollar eased by 20 points on Wednesday morning. The black gold value dropped on speculation that U.S. crude inventories would have increased for a seventh week. Crude oil settled at their lowest point in five months on yesterday, pressured by forecasts for rising supplies and continued weak demand as Gulf Coast refineries were expected to remain offline at least through the end of this week.

Oil prices are under pressure as U.S. crude stockpiles have increased in the past six weeks, mostly because of rising domestic production. U.S. crude inventories increased by 4.1 million barrels to 383.9 million barrels for the week ending Oct. 25 due to a strong rise in shale oil production. Traders expected a further increase of 2.5 million barrels for the week ending Nov. 1. The Energy Information Administration, the Energy Department’s statistical arm, is due to release the weekly supply report on Wednesday. The American Petroleum Institute (API) report released yesterday showed that US crude oil inventories increased by 871,000 barrels to 382.0 million barrels for the week ending on 1st November 2013. Gasoline inventories fell by 4.3 million barrels to 217.80 million barrels and whereas distillate inventories fell by 2.7 million barrels to 119.80 million barrels for the same week.

Brent oil added 64 cents to rise to 106.02 on Wednesday morning. Iran is likely to begin its two day meet with western diplomats tomorrow to discuss its nuclear program while a top negotiator from Iran has said that a framework deal is possible this week. Political uncertainty in Libya worsened, delaying the possible reopening of eastern oil ports and fields which have hurt Libya’s oil exports drastically, and could limit the downside in crude prices.

Traders today will also see the German and eurozone’s PMI services data which are expected to come in better and might help crude oil continue its intraday gains. Likewise, the industrial production data from the UK might improve helping to support oil prices.

Natural gas is trading at 3.475 down by 13 pips as the residential commodity looks for a bottom to sit between seasonal temperature shifts. U.S. natural gas futures ended higher on Tuesday due to bargain hunting after prices dipped to 2 ½ month lows. Traders are now waiting for Thursdays EIA inventory.