Oil Steady on Short-covering After 2-day Drop; Dollar Weighs
Oil prices steadied on Thursday as short-covering stemmed a two-day rout, but gains were capped by a rebounding dollar and concerns about returning crude supplies from Nigeria and Libya.
Crude futures lost a combined 6 percent in the past two sessions, pressured by weekly builds in U.S. petroleum products and forecasts by the world's energy watchdog and OPEC that signaled the global crude glut could persist into next year.
Selling in oil has abated since, with some traders and investors buying back to cover short positions. Still, gains in crude and other-greenback denominated commodities were capped by a dollar firming on data showing robust U.S. labor market conditions.
The dollar has trended higher this week on speculation of a U.S. rate hike. Most currency traders do not think there will be hike this month but are betting the Federal Reserve will raise rates before the end of the year.
"Oil is moving as much to the Fed's dance as the fundamentals for crude, and that explains today's flighty moves and abbreviated short-covering," said Phil Flynn, analyst at Chicago-based brokerage Price Futures Group.
Brent crude futures were up 20 cents at $46.05 per barrel by 10:40 a.m. EDT (1440 GMT).
U.S. West Texas Intermediate (WTI) crude futures slid by 10 cents to $43.48.
Expectations of a return in crude supplies from Libya and Nigeria, disrupted for months by unrest, also capped the upside in oil.
Libya's National Oil Corporation is lifting force majeure at three ports and exports will resume immediately at two of them, it said on Thursday.
In Nigeria, offers for October-loading of its Qua Iboe crude have emerged even as a force majeure remains in place.
"The perception of more supply from Nigeria and Libya is trumping the physical markets," said Scott Shelton, broker with ICAP in Durham, North Carolina. "The market could care less about strong physical markets when it sees potential for another 600,000 barrels per day of crude."
(By Barani Krishnan, Additional reporting by Dmitry Zhdannikov in LONDON)
