London: Crude oil rose to a six-month high above $63 (around Rs3,000) a barrel on Wednesday after a Saudi minister said fuel demand has started to recover.
Saudi Arabian oil minister Ali al-Naimi told reporters in Vienna for this week’s Organization of the Petroleum Exporting Countries (Opec) meeting that there are signs of rising demand in Asia. In the US, a report due on Thursday is forecast to show petrol supplies fell a fifth week amid growing optimism the worst of the recession is over.
“It looks like we won’t see any significant deterioration in demand any more, hence Opec is bullish,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. “But we still need to see improving petrol demand in the US.”
Crude oil for July delivery rose as much as $1, or 1.6%, to $63.45 a barrel in electronic trading on the New York Mercantile Exchange. That’s the highest since 13 November. Oil was at $62.78 at 12.45pm in London. Oil rose above its 200-day moving average for the first time since September, a sign that prices may rally more.
The US Conference Board’s sentiment index surged to 54.9, more than forecast and the biggest increase since 2003, the New York-based research group said on Tuesday.
“It’s not an overnight process, but we are slowly stepping away from the Armageddonic views of last October,” said Olivier Jakob, managing director of consultants Petromatrix Gmbh in Zug, Switzerland. If higher confidence starts to translate into higher consumption, then that missing part of the oil demand equation could start to bottom.
Opec, responsible for 40% of global crude supply, is likely to keep output quotas unchanged for a second time this year as recovering oil prices eliminate the need for new cuts, according to a Bloomberg survey published on 22 May.
“Opec has no need to cut oil production because there are signs of a recovery in demand in Asia, though not the US and Europe,” al-Naimi said in Vienna, where the group is meeting.
Saudi Arabia is the biggest and most influential member of Opec. The producer group is likely to keep daily output quotas unchanged at 24.845 million barrels when it meets on Wednesday, according to a Bloomberg survey of 27 analysts.
“If they do keep production at current levels, then it should push oil back down, at least below $60,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle.
US petrol inventories probably fell for a fifth week as fuel deliveries rose to meet holiday demand and refinery operations slowed, a Bloomberg survey showed.
Crude supplies in the US probably rose by 50,000 barrels in the week ended 22 May from 368.5 million the previous week, according to the median of 10 estimates by analysts ahead of an energy department report due Thursday.
Total US daily fuel consumption averaged 18.3 million barrels in the four weeks ended 15 May, down 7.6% from a year earlier, the department said last week.
Crude oil stockpiles held by the 28 nations advised by the International Energy Agency rose to 62 days of demand in the first quarter, according to the agency’s report earlier this month. That is up from 54 days in the year-earlier period and 58 days in the fourth quarter of 2008.
Stockpiles of petrol probably dropped 1.65 million barrels from 204 million the prior week, according to the median of 10 estimates by analysts. Wholesalers and retailers increase motor fuel deliveries before the summer, when Americans take to the highways for vacations.
Brent crude for July settlement rose as much as $1.05, or 1.7%, to $62.29 a barrel on London’s ICE Futures Europe exchange. It was at $61.63 a barrel at 12.45pm London time.