Singapore: Oil steadied below $54 on Wednesday after renewed worries about the financial sector neutralised bullish weekly oil inventories data showing unexpected falls in crude and gasoline stocks.
Equity markets fell after a source told Reuters that Bank of America has been deemed to need $34 billion more in capital, driving the S&P 500 futures down 1.22% by 7:49am.
US light crude for June delivery was down 1 cent to $53.83 a barrel by 8:00am, having settled 63 cents lower on Tuesday, snapping a four-day winning streak on renewed worries about oil demand.
London Brent crude was down 12 cents to $54.00 by 8:00am.
“For the next month or so, oil could trade sidweways as people wait to see whether we have actually reached the bottom in the global economic cycle and for demand to start coming back online and for these big inventories to be drawn down,” said Ben Westmore, commodity analyst at National Australia Bank.
The market will be eyeing the results of the US government bank stress tests for signs of an economic recovery that could trigger growth in oil demand.
Most of the 19 US banks being tested intend to hold press conferences on Friday to explain the results of the government’s assessments, a source briefed on the plans said on Tuesday, with about 10 of the 19 banks deemed to need more capital.
Oil had earlier risen above $54 after the American Petroleum Institute (API) reported a one million barrel draw in crude stocks against expectations of a 2.2 million barrel build, while gasoline stocks were down 2.9 million barrels ahead of the driving season against forecasts for a 700,000-barrel build.
A second set of stocks data, from the US Energy Information Administration (EIA), is to be released today, and could bring support to prices if it confirms a draw in crude stocks that would be the first in nine weeks.
Oil has risen from the low $30s hit this winter, driven higher by stronger equity markets, but has failed to settle above $55 a barrel so far this year as the market sees oil fundamentals still weak, with US crude inventories at 19 year highs.
“Ample onshore and offshore oil stocks should limit oil upside potential for a while,” said French bank Societe Generale in its weekly Oil Drivers report.
Around 100 million barrels of crude oil and 25 million barrels of products are estimated to be floating at sea on giant tankers as supply outstrips demand.