London: Oil resumed its upward march to rise above $76 a barrel on 12 July, underpinned by strong fundamentals and increased flows of fund money into the world’s most actively traded commodity.
London Brent crude, seen as the best indicator of the global market, rose 96 cents to $76.40 a barrel by 11:38 GMT, after sliding 96 cents on the previous day on the back of US weekly inventory data .
The fall on 11 July followed 10 straight days of gains during which oil rose $6 to hit a new 11-month high, bringing it within striking distance of its record high of $78.65.
US crude was up 67 cents at $73.22 after falling 25 cents a day earlier.
Investors and analysts have cited speculative buying by hedge funds and pension funds as one key factor behind the latest oil rally.
“This (recent) rally is very much fund driven... The entry of long-only hedge funds into the market is a major factor this time around. We wouldn’t rule out Brent hitting $80 this summer,” said Graham Sharp, director and one of the funding partners at commodities trading group Trafigura.
Investment bank Goldman Sachs said the strong price rally in recent weeks was “firmly grounded in near and longer-term fundamentals”.
“These tightening fundamentals have led investor length across the hydrocarbon complex to exceed the high levels reached last year, but with much more sustainable drivers.”
Traders are awaiting the International Energy Agency’s monthly report on Friday, expected to give the latest snapshot of global oil demand and stockpiles.
The agency’s medium-term oil market report released earlier this week warned oil demand would rise faster than expected over the next five years while production lags.
US Energy Information Administration data on Wednesday showed a 1.2 million-barrel increase in gasoline inventories there in the week ended July 6, just above analysts’ forecasts for a 900,000 barrel-build.
But gasoline stocks remained 8.2 million barrels lower than a year ago, while the peak demand season is expected to last at least more than a month.
US refiners have struggled with unexpected outages this year that drained gasoline stocks ahead of the summer driving season, when demand for the motor fuel peaks.
Demand for gasoline over the past four weeks was up 1.4% against year-ago levels, while total fuel demand was flat versus the same period last year.
Crude stocks in the world’s top energy consumer fell 1.4 million barrels last week, compared to an expected rise of 100,000 barrels.
Saudi Arabian oil minister Ali al-Naimi said the tightness in supply of oil products such as gasoline and international political tensions were pushing prices higher.
His view was echoed by other OPEC members, who said they were ready to pump more crude, but saw no need to do so now, rebuffing calls from consumer nations for extra oil to lower prices that reached 11-month highs this week.