London: Oil rose towards $75 a barrel on Thursday, drawing some strength from an initial report of falling US inventories.
Industry data late on Wednesday surprised the market with news of a decline in US fuel stockpiles, which have hit record levels, but government statistics for release on Thursday could contradict that.
US crude for October added 25 cents to $74.92 a barrel at 2:12pm, approaching this week’s high of $75.39 reached on Wednesday. Brent crude fell 10 cents to $78.07.
“There are tentative signs of improving demand from what we saw last week,” said Stefan Graber, a commodities analyst with Credit Suisse in Singapore. “That could suggest demand conditions are firming indeed.”
Analysts have forecast US crude stockpiles rose for the third consecutive time last week as refinery utilization fell, an expanded Reuters poll showed on Wednesday.
US crude stocks fell 7.3 million barrels last week, the American Petroleum Institute reported, versus analysts expectations for a 900,000-barrel gain.
Government statistics on inventories will follow at 8:30pm, from the US Department of Energy’s (DOE) Energy Information Administration. The API and EIA reports were delayed by one day because of the US Labor Day holiday on Monday.
“If the API drop is confirmed also by the DOE numbers, this would have a positive impact on sentiment for the rest of week,” Graber said.
Oversupply and weak demand have been largely a function of this stage of financial recovery and nearly all markets have focused on similar data as they seek evidence of economic growth.
The oil market has spent much of the year in lockstep with equities and negatively correlated to the US dollar.
The all-country world index was up 0.03%, while the dollar rose by 0.18% against a basket of currencies.
A strengthening dollar can be negative for dollar-denominated commodities, which become more expensive for non-dollar buyers.
Chinese equity and commodity markets were jolted in Asian trade by an investigation into trading on the Shanghai rubber market, which traders said had encouraged dealers to lock in profits.
US fuel stockpiles hit their highest since weekly records began in 1990 in the week to 27 August.
The huge volumes of inventory in Cushing, Oklahoma, the delivery point for the main US benchmark, have deeply depressed US crude futures relative to the European benchmark Brent.
That has taken the spread between the two contracts to more than $3, close to its widest since mid-May.
The gap between US and Brent futures could narrow if US oil draws strength from any hurricane disruption to US oil and gas infrastructure.
The US National Hurricane Center was monitoring newly-formed Tropical Storm Igor in the far eastern Atlantic Ocean and three other weather systems in the basin.