Brent rises above $124 on US stockpile drop
Singapore, April 21, 2011
Brent crude climbed above $124 a barrel on Thursday as US crude inventories fell unexpectedly last week and a sharply weaker dollar triggered a rush into riskier assets.
The dollar struck its lowest in almost three years against a basket of currencies , making dollar-denominated crude less expensive for consumers using other currencies.
'The dollar was weaker and together with the inventory numbers, these factors are supporting oil prices,' said David Cohen, director of Asian Economic Forecasting at Action Economics in Singapore.
ICE Brent crude for June gained 67 cents to $124.52 a barrel by 0220 GMT. US crude was up 76 cents at $112.21 a barrel.
Reuters data showed the correlation between a weakening dollar and rising oil prices has reached its most accentuated level of 2011.
'The dollar will remain under pressure as the Fed implements quantitative easing and other central banks start to tighten rates,' Cohen said.
A rally in equities has also boosted investor appetite for commodities. Asian stocks were poised to hit a 3-year high on Thursday, as investors scrambled to get in front of upward momentum in higher-yielding assets, particularly in emerging markets.
According to technical charts, Brent oil is expected to revisit the April 11 high at $127.02 per barrel, while US oil could hit $113.46 a barrel as the long-term uptrend for these two benchmarks have resumed, said Reuters market analyst Wang Tao.
Brent hit a 32-month high above $127 a barrel on April 11, but concerns about high prices stifling world fuel demand has cut gains since then.
International Energy Agency's executive director Nobuo Tanaka said on Wednesday that high oil prices have hurt demand in top consumers China and the United States, and Opec needs to raise output around June to stem further price rises.
However, Ecuador's oil minister said Opec sees oil prices between $80 to $90 as 'adequate' and had no plans for an emergency meeting because the market was well supplied despite unrest in Libya.
US oil data
US crude inventories unexpectedly fell 2.32 million barrels last week, bucking average analyst forecasts in a Reuters poll for a 1.1 million barrel increase. It was the first draw down since the week to Feb. 25.
Stocks of gasoline shed 1.58 million barrels to 208.1 million barrels, in line with analyst expectations for a 1.5 million-barrel draw. Gasoline stocks were down even as US gasoline demand fell by 1.8 per cent on average over the last four weeks versus the same period of 2010, EIA said.
'The overhang of US crude and oil product inventories... is now at its lowest level since the end of 2008. Cushing inventories have fallen, and we continue to see WTI as being underpriced relative to Brent,' said analysts at Barclays Capital in a research note.
The popular West Texas Intermediate (WTI) crude benchmark has been hampered by storage issues at Cushing, Oklahoma, the delivery point for US futures, where inventories hit record levels last year because of rising supplies from Canada via pipelines.
Brent crude's premium over WTI fell 10 cents to $12.30 a barrel by 0221 GMT, having narrowed from over $16.00 last week.
Analysts point to the large US draw down and signs of firm Chinese demand as evidence that worries over a sharp drop in oil demand due to higher prices may be premature.
'Concerns about a major collapse in oil demand seem misplaced at this point given the performance of demand in Q1,' said the Barclays Capital report.
China's implied oil demand grew by double digits for the sixth consecutive month in March, but was down from February as refineries scaled back runs on maintenance and soaring crude costs. – Reuters