Singapore: Oil edged further above $78 a barrel on Tuesday, after rising more than 1.5% a day ago, as traders weighed the impact of a possible rise in US crude stocks against positive manufacturing and home sales data.
The continued strength of commodities-linked currencies such as the Australian dollar also offered support to oil, with the weak US dollar also sending gold to its highest in almost two weeks.
US crude for December rose 22 cents to $78.35 a barrel by 8:48am, after settling up $1.13 on Monday. London Brent crude gained 21 cents to $76.76 a barrel.
US crude futures rose to the highest this year at $81.78 a barrel on 23 October, after turning positive on a rolling 12-month basis in the middle of last month for the first time since October 2008, raising the risk of commodity-led inflation.
“Oil has stablised around the $80 level, with the feeling in the market that when oil hits above $80, the focus shifts towards the high levels of fuel inventories,” said Victor Shum, a consultant with Purvin & Gertz in Singapore.
“So in the near term, it is still considered very difficult to push through and substain above $80.”
A Reuters poll of analysts forecast weekly US inventory data for the week to 30 October would show a 1.5 million-barrel build in crude stockpiles, a 500,000-barrel draw in distillates and a 300,000-barrel rise in gasoline inventories.
Industry group American Petroleum Institute will issue its weekly report on US inventories later on Tuesday, while the US government Energy Information Administration will issue its data on Wednesday.
Oil got a boost on Monday after US manufacturing activity hit its highest level in 3-years last month and pending home sales contracts unexpectedly jumped in September, easing fears the budding economic recovery of the world’s largest oil consumer would falter.
A separate report from the US Commerce Department showed spending on construction projects rose in September.
Energy traders have closely watched economic data and equities markets this year for signs of a turnaround in the economic crisis that could bolster flagging oil demand.
The US Federal Reserve starts its two-day meeting later on Tuesday and while it is expected to keep rates unchanged, there is speculation that it might drop or alter its pledge to keep rates low for an “extended period”..
The US dollar and the yen eased on Tuesday, while the Australian dollar extended gains ahead of the Australian central bank meeting, where interest rates are widely expected to be lifted by a quarter of a percentage point.