London: Oil fell more than a dollar to below $61 a barrel on Thursday, after hitting a six-month high in the previous session on expectations of a rebound in the world economy.
US crude for July delivery was down $1.36 a barrel at $60.68 by 4:30pm. It had settled at $62.04 a barrel, before trading up to a six-month high of $62.26 in post-settlement activity. London Brent was down $1.26 at $59.33.
Oil has nearly doubled since December, despite weak demand and high fuel inventories. Prices have risen by about a third in the past four weeks.
A rally in equity markets has partly inspired oil’s gains in anticipation of a recovery in world economic growth and oil consumption.
“While it may seem at odds with recent demand data and high levels of global inventories, we believe the economic outlook is improving and a second half recovery, perhaps more vigorous than even we foresee, is on the cards,” JP Morgan said in a note.
The bank also raised its 2009 and 2010 oil price forecasts, looking for $55.63 a barrel in 2009 against a previous forecast of $49.38. It raised its 2010 forecast by an even larger $10 to $67.50 a barrel.
Latest US government data on oil inventories provided evidence to support the view that the economic climate might be improving.
Crude oil and gasoline stockpiles in the United States tumbled sharply last week, according to the US Energy Information Administration, with crude declining 2.1 million barrels and gasoline falling 4.3 million barrels.
“We have become more confident that global activity is nearing the turning point,” Citi oil analysts said in a research note. “Nevertheless, we still expect that the pace of global recovery will be subdued,” it said.
“The widespread global plunge in activity and credit availability remains a drag on global trade.”
Bullish investor sentiment about the global economic outlook showed signs of moderating after the United States cut growth forecasts for the next three years and credit rating agency Standard & Poor’s cut its outlook on the United Kingdom to negative from stable.
This knocked European equity markets, ending a five-day advance.
The Organization of Petroleum Exporting Countries or Opec, which has agreed to cut 4.2 million barrels per day of output since September in a bid to prop up oil prices, will meet on 28 May to discuss output policy.
Ministers have said they saw no need to cut production further.
Weekly US jobless claims and April leading indicators are due later on Thursday, which could give more clues on health of the economy in the world’s top energy consumer.