Oil follows US equity markets higher

Oil prices Wednesday bounced back from a mid-morning slide and ended higher amid a rally in equity markets.

The price of US benchmark West Texas Intermediate for delivery in August rose 18 cents to $99.50 a barrel on the New York Mercantile Exchange.


The price of European benchmark Brent crude for August delivery finished at $101.66 a barrel, up 40 cents.

The gains came as US equity markets moved higher after the Commerce Department slashed the estimate of first quarter growth from 2.4 percent to 1.8 percent.

The market took the weaker economic data to mean the US Federal Reserve will maintain its aggressive bond-buying program.

"The (oil) market is influenced more by changing economic perceptions than its underlying fundamentals," said Gene McGillian, a broker and analyst at Tradition Energy.

The weak GDP numbers "knocked down the probability of the Fed going through with its QE tapering," said Bart Melek, head of commodity strategy at TD Securities.

US oil prices sank as low as $93.68 after US oil inventories came in flat with last week's level, above the forecast for a drop of 1.7 million barrels, according to analysts polled by Dow Jones Newswires.

The data also said gasoline stockpiles surged by 3.7 million barrels, well above the gain of just 660,000 barrels seen by analysts.

McGillian called the inventory report "bearish" but not a "game-changer" because other recent inventory reports have shown similar trends.

Oil has held up in recent days in contrast to some other commodities, such as copper and gold.

Bill O'Grady, chief market strategy at Confluence Investment Management, attributed oil's relative strength to the influence of OPEC and impact of the Syria conflict and the perception of supply risk.

"Energy on a relative basis has held up relatively well," O'Grady said.