Oil prices were reacting to movements in currency markets early in the day amid lack of other clues.
The US backed off from its somewhat aggressive rhetoric directed at China’s trade policies and refrained from labelling China a currency manipulator. It may still do that when it releases its currency statement, expected after the upcoming G20 meeting that will take place on 11 November.
As a result of that move, the yuan fell from all time highs against the US dollar. The euro also lost ground against the greenback with the EUR/USD rate plummeting to 1.388 after breaking through 1.41 last week.
A stronger US dollar makes the dollar-denominated crude more expensive for holders of other currencies, denting demand.
A recovery in equity markets and stock index futures provided some relief for oil, helping it recover part of its early losses. Futures for the Dow Jones Industrial Average in the US were flat after falling about 0.5% amid cautious trading ahead of today’s corporate results.
The futures recovered after Citigroup (NYSE:C) posted a quarterly profit of US$2.17 billion, which was ahead of expectations.
Other US companies due to report today are Apple (NYSE:AAPL), Halliburton (NYSE:HAL), Hasbro (NYSE:HAS) and IBM (NYSE:IBM).
On the ICE Exchange, November Brent Crude futures improved to 82.41/barrel after falling below US$82/barrel this morning, while December Brent reached US$82.89/barrel.
US light, sweet crude for December delivery, which is currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), improved to US$81.72/barrel, while November futures climbed to US$81.05/barrel.
BP (LON:BP) posted a small gain after selling US$1.8 billion worth of assets in Vietnam and Venezuela to its 50% owned joint venture TNK-BP. BP is trying to raise US$30 billion by the end of next year to cover the damage claims stemming from the disastrous oil spill in the Gulf of Mexico that wiped out a third of its share price since it kicked off in April.
Likewise, fellow supermajor Shell (LON:RDSB) tacked on less than 1%, as did Cairn Energy (LON:CNE) and Tullow Oil (LON:TLW).
BG Group (LON:BG) outperformed the sector, rising 1.6%.
Oil and gas engineering firms also did well with Amec (LON:AMEC) and Petrofac (LON:PFC) climbing 2.2% and 1.4% respectively.
Salamander Energy (LON:SMDR) led the midcaps with a 4% advance. Melrose Resources (LON:MRS) followed, rising 1.2%, while Premier Oil (LON:PMO) posted a small gain.
Heritage Oil (LON:HOIL) headed in the opposite direction, shedding 1.7%. JKX Oil & Gas (LON:JKX) declined marginally.
Dana Petroleum (LON:DNX), Dragon Oil (LON:DGO) and Soco International (LON:SIA) were little moved.
Wood Group (LON:WG) stood just above the opening level. Another oil and gas services firm Wellstream Holdings (LON:WSM) added 1%.
Oil and gas company Gulf Keystone Petroleum (LON:GKP), which is focused on the Kurdistan region of Iraq, was among the top performing small caps with a 7.5% gain. This morning, the company announced that it has successfully raised £109 million which will allow it to fully appraise its world class Shaikan oil field in Kurdistan.
EU focused oil and gas producer and explorer Europa Oil & Gas (LON:EOG) and energy sector focused investor Xtract Energy (LON:XTR) followed, tacking on 6% and 5% respectively.