Singapore: Oil rose for a third day on Wednesday, adding 0.7% after an industry report showed a larger-than-expected decline in US crude stocks, bolstering the view that a glut will dwindle as demand resurges.
Inventories fell 4.5 million barrels last week, the American Petroleum Institute said on Tuesday, more than four times as much as expected.
The supply report allowed the oil market to temporarily shrug off moves in equities, which continued to be mixed on Wednesday. Crude futures traders have adopted stock indices as a barometer for perceptions on risk, growth and energy demand.
US crude for July delivery rose 55 cents to $72.54 a barrel at 8:32am, still down 17% from a 19-month high above $87 in early May. July ICE Brent was trading almost at parity, up 20 cents at $72.50.
“The US economy is certainly in recovery mode; oil consumption seems to be recovering, with gasoline and distillate fuel demand stronger,” said David Moore, an analyst at the Commonwealth Bank of Australia.
The Energy Information Administration (EIA) will publish more closely watched government statistics on US oil inventories and demand on Wednesday at 6:00pm.
“The EIA data tonight is important particularly because of the large numbers we had in the API. We have to see if that is replicated in the EIA data,” Moore said.
The drop in US crude inventories reported by the API was matched by an equivalent increase in product supplies. Gasoline stocks posted an unexpected increase of 1.5 million barrels and distillates, including heating oil and diesel, logged a larger-than-forecast gain of 3 million barrels.
“It would be premature to say that we have seen the bottom in the market,” Moore said. “The data flow is a little bit uneven and the market still has a focus on developments in Europe. There is obviously potential for fiscal difficulties.”
A report by Fitch Ratings that the Britain faced a “formidable” fiscal challenge pushed European stocks to near two-week closing lows.
On Wednesday, Japan’s Nikkei average fell 1% towards a six-month low.
Chinese trade data for May, including oil statistics, will be published on Thursday, followed by industrial production for the same month on Friday, with growth forecast at 17.1% in a Reuters survey, down from a 17.8% gain in April.
“The Chinese data could be quite market moving,” Moore said. “If it comes out weaker than expected, that would be negative for commodities. If they come out stronger, they can give confidence” about the recovery.