Singapore: Oil hovered below $71 a barrel on Wednesday, after snapping a nine-day losing streak a day earlier, as data showing a deep drawdown in US distillate stockpiles outweighed a surprise rise in crude inventories.
Another set of oil inventory data from the US Energy Information Administration (EIA), due later in the day, could offer more clues on the pace of demand recovery in the world’s top energy consumer.
The US Federal Reserve’s monetary policy decision will also be closely eyed. Interest rates are seen staying unchanged at near zero, but the tone of comments made could shed light on when the Fed might start tightening policy, amid the spectre of higher inflation.
Crude for January delivery rose 10 cents to $70.79 a barrel by 0240 GMT, after settling up $1.18 at $70.69 on Tuesday. London Brent crude was up 16 cents at $72.21.
Oil prices rebounded on Tuesday from their longest slide since 2001, after they had fallen more than 11% since 1 December, amid persistent worries over high global inventories and weak consumption.
“We think that the rebound in oil prices is sustainable, as the factors that underpinned gains in the past few weeks will remain in place -- that the global economic recovery is underway,” said David Moore, a commodity strategist with the Commonwealth Bank of Australia.
“Markets will increasingly focus on the global recovery story, and with Opec likely to keep output targets unchanged at its meeting next week, this will support oil prices further.”
The pace of the US economic recovery appears to be gathering steam, after November producer prices jumped a surprise 1.8% and industrial output rose firmly, sparking inflation jitters in financial markets.
But any recovery in US fuel demand remains patchy.
Distillate stocks, which include heating oil and diesel, fell by 2.6 million barrels last week, eclipsing analysts’ projections of a 600,000-barrel drop, but crude supplies rose by 924,000 barrels, countering forecasts of an 1.8 million-barrel decline, data from the American Petroleum Institute (API) showed.
Gasoline inventories rose by 2.1 million barrels, topping expectations of a 1.3 million-barrel build.
A further drawdown in distillate stockpiles could be on the cards, after a 10-day National Weather Service forecast earlier this week called for lower-than-normal temperatures in most of the eastern US, the world’s biggest regional consumer of heating oil.
More economic data, due later, will also offer clues on the US recovery pace and the possible threat of inflation.
At 1330 GMT, the Labor Department will release the November consumer price index. Economists expect a 0.4% rise compared with a 0.3% increase in October.
On the supply side, the Organization of the Petroleum Exporting Countries is expected to hold production targets steady at its next meeting on 22 December.
The producer organisation on Tuesday said it sees the oil market staying weak until the second half of next year, as a rise in oil demand is countered by a huge volume of excess supply.