Oil futures ended higher for the second consecutive session buoyed by a weekly decline in US production levels and hopes of further monetary easing by the European Central Bank.
West Texas intermediate Futures grew strongly in morning trading on a strong showing by US stocks but relinquished most of the gains in the afternoon after the stock rally lost steam ending marginally higher on the day.
Light sweet crude for October delivery pared most of its early morning gains but still ended 50 cents higher at $46.75 a barrel on the New York Mercantile Exchange.
Brent Futures added 18 cents or 0.4% to close at $50.68 a barrel on the London based ICE Futures Exchange.
“You can call it a risk on day,” Tariq Zahir, a trader in crude oil spreads at Tyche Capital Advisors in Laurel Hollow, New York, told Fox Business.
“It’s reminiscent of yesterday’s action when crude moved up with equity markets even when fundamentals were weak.”
Driving most of the gains, however, were expectations that the European Central bank would extend its stock buyback program after the ECB president Mario Draghi said in a press conference that the ECB was committed to fully implementing its asset buying program and extend it if necessary.
Such a stimulus would be bearish for the demand of oil helping boost oil prices from their recent multiyear lows.
“Given that the recent bearish news such as the sharp increase in U.S. oil inventories have not been enough to push prices further lower, it looks like most of the bad news is priced in now,” Fawad Razaqzada, analyst at Forex.com, told Market Watch.
“If this view is correct, then a sharp correction to at least the $50 handle seems to be the most likely outcome for WTI prices.”
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