Oil steady above $83 on US demand signs
Singapore, April 29, 2010
Oil was steady above $83 on Thursday as energy markets shrugged off credit rating downgrades for southern European countries, encouraged by signs that US demand will improve this summer.
Standard & Poor's on Wednesday cut Spain's rating one notch a day after lowering Greece to junk status and downgrading Portugal, raising concerns of spreading sovereign credit risks.
But the Federal Reserve left interest rates near zero on Wednesday and gave an upbeat assessment of the US economy.
Crude was also getting support from expectations that gasoline use in the US will accelerate during the driving season between late May and early September.
Demand in the world's top gasoline consumer jumped 3.1 per cent in the past four weeks from a year earlier, causing an unexpected drop in gasoline stockpiles last week, government statistics showed on Wednesday.
'People saw all the downgrades coming since a month ago, but oil is still quite strong,' said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore, adding that the market's resilience to the European debt crisis was 'quite bullish.'
'The inventory report is not as bearish,' Chu said. 'There is a surprise draw in gasoline, and if you look at the charts for the past week or so, it seems like the market is quite comfortable around the $84 level.'
US crude for June delivery shed 13 cents to $83.09 a barrel at 0245 GMT, after climbing almost 1 per cent on Wednesday, boosted by rising stock markets. Prices are about $4 lower than an 18-month high above $87 reched on April 6.
ICE Brent crude for June slid 10 cents to $86.06, keeping a $3 premium to front-month US crude after stockpiles at the Cushing, Oklahoma, delivery point for West Texas Intermediate crude climbed for a sixth consecutive week.
Total US crude stockpiles rose by 1.9 million barrels in the week to April 23, the Energy Information Administration said on Wednesday, more than a forecast 1-million-barrel increase.
Gasoline inventories fell by 1.2 million barrels, compared with estimates by analysts polled by Reuters of an 800,000 barrel gain, while distillate rose by a larger-than-expected 2.9 million barrels.
Total US oil demand climbed 1 per cent over the past week, according to the EIA.
'The driving season in the US is going big indication of whether demand is actually recovering,' Chu said.
The oil market was paying little attention to currency moves on Thursday, when The dollar weakened by about 0.17 per cent as the euro recovered from one-year lows a day earlier.
Oil traders were also following the debate over US financial regulation in Congress.
A three-day US Senate standoff over efforts to overhaul financial regulation ended on Wednesday as Republicans dropped efforts to block a Democratic bill in exchange for a handful of concessions. – Reuters