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Energy prices rebound as traders focus on shrinking gasoline stockpiles

Energy prices rebound as traders focus on shrinking gasoline stockpiles

Oil and gasoline prices bounced back from an early slump Monday, closing higher as traders shifted their focus to the tightness of U.S. gasoline supplies and away from housing trends and concerns about economic growth.
Energy prices initially sagged Monday after a report on sluggish new-home sales knocked some wind out of Wall Street's run higher and renewed worries about economic expansion and petroleum demand. But as trading wore on, commodities investors appeared to focus more on specific market fundamentals.
Metals and agriculture futures finished mixed.
The National Association of Realtors on Monday said sales of existing homes fell 0.2 percent in July to the slowest pace in five years, while the median selling price of homes fell as well. It was the 12th consecutive month that the median home price declined compared with a year ago. The weak economic data countered Friday's stronger-than-expected reports on factory orders and sales of new homes, which had bolstered both stocks and commodities.
The commodities market suffered a downturn in recent weeks as tightening credit conditions curtailed investors' appetite for risk. The Dow Jones-AIG Commodity Index tumbled 4.66 percent in August, as declines in industrial metals and energy offset sharply higher agriculture futures. The index tracks a basket of 19 commodities futures contracts and serves as the underlying benchmark for an estimated $38 billion in assets.
Strained credit conditions have "put a lot of people on the sidelines basically because of the uncertainty of getting finances to do physical business," said copper trader John Hanemann, president of Hanemann Trading Co. "I think it's affected everybody's business somewhat."
Trading in several markets was thinner than usual Monday, exacerbating price swings, due to a bank holiday in London and ahead of the Labor Day holiday Sept. 3.
Copper prices climbed for a fifth straight day on the New York Mercantile Exchange, extending the metal's rise from a trough of $3.09 on Aug. 17, the low this month for the December futures contract. Last week's report showing a 2.8 percent rise in July new-home sales engendered new optimism about economic growth and copper demand.
Dow Jones Newswires also reported that strikes at mines owned by Grupo Mexico entered a fifth week on Monday. The work stoppages, which include a strike at the large Cananea copper mine, have helped underpin prices.
Copper added 0.6 cent to settle at $3.356 a pound. The London Metal Exchange was closed Monday.
Gold and silver prices dipped, as the U.S. dollar strengthened against the euro. Precious metals often move opposite the U.S. dollar, as investors try to hedge against rising or falling inflation. December gold lost $1.30 to close at $676.20 an ounce on the Nymex, while December silver fell 17.4 cents to $11.924 an ounce.
Meanwhile, oil prices added to the gains logged at the end of last week. Light, sweet crude for October delivery rose 88 cents a barrel to settle at $71.97 the Nymex, after rising more than $1.80 Thursday and Friday of last week. September gasoline futures, which expire later this week, rose 5.79 cents to $2.0393 a gallon.
"The last hurrah for gasoline demand will be the next week or two," said Michael Waldron, energy market analyst at Lehman Brothers. "Seasonally, gasoline demand pares off after Labor Day."
U.S. gasoline stocks plunged by 5.7 million barrels in the week ended Aug. 17 to the lowest level since mid-May, according to last week's Energy Information Administration report. On average, analysts surveyed by Dow Jones Newswires expect this week's EIA report, due out Wednesday, to show gasoline inventories shrinking by another 1.8 million barrels.
Traders continue to weigh the potential impact of a mid-August fire that hit Chevron Corp.'s Pascagoula, Miss., refinery and has hindered production. Chevron spokeswoman Stephanie Price said in an email late Friday that while the company plans to repair the damaged equipment, "it would be inappropriate to speculate about the extent of repairs or how long particular units will remain offline."
At the same time, credit market sentiment continues to be shaky, and many funds holding long positions in crude oil, natural gas and petroleum products have pulled out of the market in recent weeks. Waldron said that liquidation related to losses from the credit arena has "cast a bearish uncertainty, but this is balanced against some pretty strong supply and demand fundamentals in crude oil."
Elsewhere, agriculture futures ended mixed on the Chicago Board of Trade, as wheat prices fell slightly following five straight sessions of sharp gains. Corn prices also fell, while soybean prices wavered.
Reflecting tight world supplies and strong demand, the December wheat contract _ which holds the largest open interest _ reached an all-time high last week of $7.54 a bushel. Open interest refers to the number of futures contracts that have not expired, been exercised or fulfilled by delivery.
December wheat dropped 4 cents to settle at $7.38 a bushel. Corn for December delivery fell 5.75 cents to $3.53 a bushel, while soybeans for November delivery rose 7.75 cents to $8.7275 a bushel.


Updated : 2020-12-03 22:11 GMT+08:00