London: Oil rose to a six-month high above $63 a barrel on Wednesday after Opec’s biggest member Saudi Arabia said the global economy had strengthened enough to cope with oil at $75-$80 a barrel.
Speaking ahead of an Organization of Petroleum Exporting Countries’ (Opec) meeting in Vienna on Thursday, Saudi Oil Minister Ali al-Naimi said oil prices would continue to rise, recovering from lows near $32 at the turn of the year.
“The price rise is a function of optimism, better things are coming in the future,” Naimi told reporters in Vienna.
“We see offshoots of recovery,” he added. “Demand is picking up, especially in Asia.”
The minister said Opec did not need to change its output policy, which has already seen the group agree to remove 4.2 million barrels per day of oil from the market in a bid to shore up prices battered by recession.
US crude oil for July delivery rose to touch $63.45 a barrel, the highest level since mid-November, before easing slightly to trade up 67 cents at $63.12 a barrel by 4:22pm.
London Brent crude rose 76 cents to $62.00
Oil prices gained more than 1% on Tuesday, bolstered by a jump in US consumer confidence. Signs of a modest recovery in Japanese exports on Wednesday further boosted expectations the world is slowly emerging from its worst financial crisis in decades.
“We’re not really seeing a strong recovery yet, but I think Opec are implying they don’t see oil demand falling any further,” VTB Capital analyst Andrey Kryuchenkov said.
“Everyone talks about green shoots but we’re not completely out of the woods - to see a real price rally we’ll need to see a larger pick-up in demand.”
Global oil demand is seen falling at the fastest rate since 1981 this year, with the International Energy Agency, adviser to 28 industrialised nations, predicting a 2.56 million barrel per day fall.
Crude inventories have risen to around 62 days of forward cover, but expectations of a slight drawdown in US crude inventories are lending support to prices, analysts said.
A preliminary Reuters poll ahead of US weekly inventory data showed forecasts for a 1.1 million drawdown in crude stocks and a 1.8 million decline in gasoline stocks last week.
Data from the American Petroleum Institute data has been delayed by one day until Wednesday while US Energy Information Administration oil inventory data will be released on Thursday due to the US Memorial Day holiday at the start of this week.
Prices also shot above the key technical level of the 200-day moving average on Wednesday, for the first time in more than eight months, adding to some analysts’ convictions that oil has found a new price floor at $60 and may rise towards $65.