Singapore: Brent crude rose above $122 a barrel on Wednesday as a rebound in equities and a larger-than-expected fall in US oil product stockpiles helped ease fears over eroding demand.
Asian shares rose following gains on Wall Street and in Europe on upbeat corporate results from investment bank Goldman Sachs and chip maker Intel Corp .
“Last week we saw some disappointing results in tech shares like Google, but the Goldman Sachs earnings were better than expected and that resulted in a reversal in risk appetite, which is good for commodities,” said Serene Lim, a commodities analyst with ANZ Bank in Singapore.
ICE Brent crude gained 57 cents to $121.90 a barrel by 1:00pm, US crude was up 92 cents at $109.20 a barrel, after rising over $1.00 earlier.
High oil prices have dampened demand from top consumers China and the United States, the International Energy Agency’s executive director, Nobuo Tanaka, told Reuters on Wednesday.
Producer group Opec needs to boost output in June or July to douse further price rises, Tanaka said.
Opec has to date declined to make a coordinated increase in supply, despite warnings from consumers that prices could stall the economic recovery and slow fuel demand growth.
Top oil exporter Saudi Arabia said on Sunday that it had cut supply in March from February due to oversupply in the market.
US President Barack Obama weighed in on Tuesday, as he blamed speculators for driving gasoline prices higher and straining American consumers, saying there was enough oil in world markets to meet demand.
But if crude prices stayed at $100 a barrel or more for the rest of 2011, similar demand destruction as that seen in 2008 would happen again, Tanaka said.
Warnings of demand destruction have grown after world oil prices rocketed up to 2-1/2-year highs of $127 a barrel earlier this month amid worries of unrest in the Middle East and North Africa.
Also supporting oil, the dollar index , which measures the greenback against a basket of currencies, extended its losses after solid euro zone economic data helped the euro rebound against the dollar.
A weaker dollar can lift oil prices by making dollar-denominated crude less expensive for consumers using other currencies and by drawing investment away from foreign exchange markets seeking better returns.
Brent oil could rise to $124 per barrel as a retracement from its April 11 high of $127.02 could have been completed, said Reuters market analyst Wang Tao.
US OIL DATA
Data from the American Petroleum Institute on Tuesday showed gasoline stocks fell 1.8 million barrels and distillate stocks dropped 3.4 million barrels last week in an unexpected decline.
Analysts surveyed by Reuters forecast gasoline stocks would fall 1.5 million barrels and distillate stocks would be unchanged.
“The API numbers were rather bullish, and set a good platform for the oil data out of the US tonight to boost prices,” said Lim.
The US Energy Information Administration’s weekly data will follow on Wednesday at 8:00pm.
Tension persisted in the Middle East after Yemeni police opened fire on protesters in Sanaa and Taiz on Tuesday, killing at least three people, as protesters tried to step up their campaign to end President Ali Abdullah Saleh’s 32-year rule.
In Syria, forces loyal to Muammar Gaddafi renewed the bombardment of Misrata, causing several casualties, an Amnesty International researcher in the besieged Libyan city said.