Crude Oil Soars To End Above $51 On Ukraine Ceasefire, More Investment Cuts

(RTTNews) - U.S. crude oil soared to end sharply higher on Wednesday, rebounding after a two-day loss, as the dollar weakened and on demand growth optimism as oil producers continued to scale down investments. Oil prices were also helped by news that Russia and Ukraine agreed to a ceasefire following some extended peace talks in Minsk.

Crude prices had dipped yesterday on renewed concerns of a supply glut after an official weekly oil report showed stockpiles in the U.S. to have surged more than expected last week.

Leaders of Russia and Ukraine reached a deal to end their fighting after a 17-hour negotiation in Minsk, even as German Chancellor Angela Merkel cautioned that much more work needs to be done to secure lasting peace.

Oil production in the U.S. are likely to be hit with investment and jobs in the industry dwindling due to the low oil prices. Total is the latest oil major to aggressively cut costs, indicating that it was not feasible to pump in more money due the low prices.

French energy giant Total also announced its decision to cut jobs and investments due to the low price of oil and is expected to take a $6.5 billion write-down.

Royal Dutch Shell CEO Ben van Beurden said he believes oil demand to likely overtake supply growth this year, and cautioned that supply may take a nosedive if oil prices continue to fall. In an effort to check losses due to sharp decline in oil prices, Shell in late January revealed plans to cut spending by about $15 billion over a three-year period, with dividend freezes and cutting down shale investments.

Light Sweet Crude Oil futures for March delivery, the most actively traded contract, soared $2.37 or 4.9 percent to settle at $51.21 a barrel on the New York Mercantile Exchange Thursday. Crude prices for March delivery scaled a high of $51.45 a barrel intraday and a low of $49.14.

On Wednesday, crude oil settled sharply lower at $48.84, down $1.18 or 2.4 percent, as concerns of a supply glut resurfaced after an official weekly oil report from the Energy Information Administration showed crude stockpiles in the U.S. to have surged more than expected last week.

U.S. crude stockpiles rose more than expected, by 4.9 million barrels to 417.9 million barrels, in the week ended February 6, a U.S. Energy Information Administration report showed Wednesday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 94.28 on Thursday, down from its previous close of 94.93 late Wednesday in North American trade. The dollar scaled a high of 94.97 intraday and a low of 93.98.

The euro trended higher against the dollar at $1.1390 on Thursday, as compared to its previous close of $1.1334 late Wednesday in North American trade. The euro scaled a high of $1.1424 intraday and a low of $1.1305.

On the economic front, first-time claims for U.S. unemployment benefits unexpectedly climbed back above the 300,000 level in the week ended February 7, continuing to rebound from a recent pullback. A Labor Department report on Thursday showed initial jobless claims to have climbed to 304,000, an increase of 25,000 from the previous week's revised level of 279,000. Economists expected jobless claims to rise to 288,000 from the 278,000 originally reported for the previous week.

With sales at gas stations showing another substantial decrease, a Commerce Department report revealed U.S. retail sales to have dropped more than anticipated in January. Retail sales fell 0.8 percent in January after slumping by 0.9 percent in December. Economists expected sales to drop by 0.5 percent.

Eurozone industrial production remained flat in December after expanding for three consecutive months, data from Eurostat revealed Thursday. Industrial production remained unchanged from November, while it was forecast to grow 0.2 percent. The growth rate for November was revised down to 0.1 percent from 0.2 percent.

Germany's consumer prices fell for the first time since September 2009 in January and at a faster than initially estimated pace, final data from Destatis showed Thursday. The consumer price index dropped 0.4 percent in January from last year, while it was estimated to fall by 0.3 percent. This was the first drop since September 2009 and the biggest decline since July 2009, when prices slid 0.5 percent.

Business inventories in the U.S. increased in December due partly to a rebound in retail inventories, although business sales showed a notable decrease, a Commerce Department report indicated Thursday. Business inventories inched up 0.1 percent in December after edging up 0.2 percent in November. Economists anticipated another 0.2 percent increase.

Meanwhile, business sales slumped by 0.9 percent in December after sliding 0.4 percent in November. Wholesale inventories edged up 0.1 percent in December after climbing 0.8 percent in November, while manufacturers' inventories dipped by 0.3 percent after coming in unchanged in the previous month.