Oil up 4pc to $71 on US demand, equities
London, May 26, 2010
Oil rose by almost 4 per cent on Wednesday to above $71 a barrel as signs of a strong recovery in US demand and a bounce in equity markets overshadowed rising crude stocks and lingering concerns about the euro zone economy.0
By 1519 GMT, US crude oil was up $2.38 a barrel at $71.13 a barrel, while Brent crude was up $2.00 at $71.55 a barrel. US crude has rebounded by more than $4 since its low near $67 a barrel on Tuesday.
Over the last four weeks, demand for oil products in the United States, the world's largest energy consumer, has been almost 7 percent higher than the same period last year, the Energy Information Administration (EIA) said on Wednesday.
Despite rising demand, total crude oil inventories continue to mount, rising 2.4 million barrels last week, though they eased slightly at Cushing, Oklahoma, the closely watched delivery hub for the Nymex crude contract.
Gasoline stocks fell by 200,000 barrels, as predicted by the market, while distillate stocks, including diesel and heating oil, posted a surprise fall of 300,000 barrels.
'Overall (it is) a slightly bearish number, but right now everyone is so relieved that we had the recovery in the equity markets yesterday and spilling over into today, that oil is near its highs here,' said Mike Zarembski, senior commodities analyst at optionsXpress in Chicago.
Bargain hunting lifted equity markets on Wednesday, with European shares recovering from Tuesday's nine-month low.
However the euro fell against the dollar for a third straight day, while US Treasury Secretary Timothy Geithner urged European leaders to find a unified approach to the region's deepening debt crisis.
The European debt crisis has seen oil prices fall sharply since hitting a 19-month high above $87 a barrel at the start of May, but some analysts said the market now looks oversold, having shed almost $20 in just three weeks.
'The concerns that European economies are at risk of a double dip appear to have receded, some of the selling appears to have been exhausted, and positive economic indicators are in the ascendant in relation to apparent deleveraging of risk by financial markets,' JP Morgan analyst Lawrence Eagles said.
New orders for long-lasting US manufactured goods rose by more than expected in April, boosted by booking for expensive aircraft, government data showed on Wednesday, but were down excluding transportation for the first time in three months.
Jean-Jaques Mosconi, head of strategy at French oil major Total, told Reuters Energy Summit prices were unlikely to fall far below $70 a barrel as global demand was increasing.
'Europe is the big issue here. China is doing well, India is growing, the Middle East is growing. Even the US is recovering,' Mosconi said.
Prices were also boosted on Wednesday after Kuwait's Oil Minister Sheikh Ahmad al-Abdullah al Sabah said the Organization of the Petroleum Exporting Countries (Opec) would take notice if oil fell to $65 a barrel.
Shokri Ghanem, chairman of Libya's National Oil Corporation, told the Reuters Global Energy Summit Opec members are talking informally about the drop in oil prices, and are urging each other to comply more closely with agreed supply targets.-Reuters