Oil roars into September 'like a lion'

oil chart.pngClick chart to view other commodities. By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- After ending August in a slump, oil prices surged into September, rallying nearly 3% Wednesday, and continuing to move higher Thursday following news of an oil platform explosion in the Gulf of Mexico.

"August was the worst month for oil since last May, with oil bulls really getting beat up as economic data started to turn South," said said Phil Flynn, a senior market analyst at PFG Best. "But we went out of August like a lamb and into September like a lion."

After a strong start to the month, news that an oil platform owned by Mariner Energy (ME) exploded in the Gulf of Mexico helped modestly support prices, which climbed 1.5% Thursday, following a 3% jump during the previous session.

Platform explosion: The platform explosion, which took place on Mariner's Vermilion Oil platform 380, occurred at least 80 miles south of Vermilion Bay on the Louisiana coast.

But the event is unlikely to move prices dramatically, said Chris Lafakis, an associate economist at Moody's Economy.com.

"The indications are that this rig explosion is not going to significantly affect U.S. production because it would be such a small portion of crude oil supply being taken off the market," said Lafakis. "So the impact on prices would be miniscule."

The United States only provides 5 million barrels of oil a day, whereas global supply is 85 million a day. And of the 5 million barrels the U.S. produces, offshore production only accounts for about a fourth of total U.S. crude oil production, said Lafakis.

"If you look at the Deepwater Horizon (explosion), it wasn't even a production well, it was for exploration, so that didn't do much to prices," he said. "And even if the [Mariner] rig was a producing well, one well being taken offline is not really going to have much of an influence on global supply and demand."

Brightening economic outlook: Disappointing reports on housing, jobs and economic activity dragged oil prices 9% lower last month as investors worried about the health of the economy and global demand for oil.

But sentiment has taken a slight turn for the better as September begins, with an upbeat report on manufacturing getting the ball rolling on Wednesday.

"Throughout the recovery, manufacturing has been one bright spot, so earlier when regional manufacturing numbers weren't coming in as good, people thought the bright spot was starting to dim," Flynn explained. "But this report showed that the bright spot has once again moved out from behind the clouds."

Meanwhile, a reading on consumer confidence in August came in better-than-expected, and a separate report showed a 5.2% jump in pending home sales for July.

Still not out of the woods: The mood could quickly turn sour if more economic data doesn't improve from the previous month, said Flynn.

On top of that, crude supplies are at the highest level since 1990 and demand is dropping as we enter "shoulder season" -- when it's too late to turn on the air conditioner but too early to turn on the heat -- so oil could easily hit another rough patch.

"Hope springs eternal in the beginning of the month, but the month of September is going to be a tough one for the market," said Flynn. "We're still not out of the woods yet, so the bulls better enjoy the gains while they can."

Depending on what upcoming economic reports say about the shape of the economy, Flynn expects prices to trade between $67 a barrel and $76 a barrel through September. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.24%4.32%
15 yr fixed3.25%3.36%
5/1 ARM3.27%3.37%
30 yr refi4.28%4.31%
15 yr refi3.30%3.34%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 16,501.65 0.00 0.00%
Nasdaq 4,148.34 21.37 0.52%
S&P 500 1,878.61 3.22 0.17%
Treasuries 2.69 0.00 0.07%
Data as of 3:59am ET
Company Price Change % Change
Facebook Inc 60.87 -0.49 -0.80%
Bank of America Corp... 16.34 -0.03 -0.18%
Microsoft Corp 39.86 0.17 0.43%
Verizon Communicatio... 46.28 -1.15 -2.42%
Micron Technology In... 26.16 -0.09 -0.34%
Data as of Apr 24

Sections

The billionaire co-founder of Alibaba has set up charitable trusts ahead of the company's highly anticipated IPO, a move that could mark the start of a new era of Chinese philanthropy. More

Hundreds of postal workers nationwide protested outside Staples' stores on Thursday. More

Federal regulators are poised to lay down new rules of the road for how Americans access the Internet. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

Do you feel like you are overworked? Here are how other people deal with the stress and politics in their jobs. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.