Singapore: Oil jumped to a one-week high above $75 on Thursday alongside positive sentiment in Asian equities, reinforcing overnight gains triggered by an industry report showing US crude inventories plunged last week.
The euro surged to a two-month high and Asian stocks climbed to their highest in more than a week on Thursday after a bullish forecast from State Street a day earlier fuelled optimism about the coming US earnings season and underpinned growing tolerance for risk, sending Wall Street higher.
“The fear over a double-dip recession or something more dramatic has eased a little bit from a month ago,” said Yingxi Yu, a Singapore-based commodities analyst with Barclays Capital. “Market sentiment remains a very important driver. Oil really follows equity markets and other risky assets.”
US crude for August rose as much as $1.03 or 1.4% to $75.10 a barrel, the highest intraday price since 1 July, and was up 53 cents at $74.60 by 12:38pm, on the New York Mercantile Exchange. ICE Brent crude for August rose 34 cents to $73.85.
Oil prices are still more than $12 away from a 19-month peak above $87 reached in early May, though they have rebounded by about $10 from a trough below $65 on 20 May.
Crude inventories in the United States tumbled by 7.3 million barrels last week, the American Petroleum Institute reported late on Wednesday, more than three times the expected drop.
“We have seen a very quick response in the market,” Barclays’ Yu said. “Perhaps it’s a reflection of the temporary closures on the US Gulf coast due to Hurricane Alex.”
Stockpiles fell after Hurricane Alex forced some producers in the US Gulf to curb production and Mexico to close loading terminals that send most of their output to US refiners.
A tropical depression formed over the northwestern Gulf of Mexico late on Wednesday, heading towards the Texas-Mexico border, a region still recovering from Alex, the US National Hurricane Center said.
A tropical storm warning was issued in the lower Rio Grande valley along the border, from south of Baffin Bay, Texas to Rio San Fernando, Mexico. The warning signalled the storm could make landfall within the next 24 hours. The expected course takes the weather system away from main oil-producing regions of the Gulf.
Government statistics on US oil inventories and demand from the Energy Information Administration follow the API data on Thursday at 8:30pm.
“We have to wait and see what the EIA tells. If it’s a confirmation, it would provide support to the market in the short term,” Yu said.
Expectations are for crude stockpiles to have dropped 2.3 million barrels, according to a Reuters survey.
Gasoline stocks fell 191,000 barrels, the API said, in line with analysts’ projections, while distillates including heating oil and diesel fell 1 million barrels, contrary to a forecast for a 1.4 million-barrel gain.
Another serious storm in the Gulf of Mexico could further disrupt efforts to contain BP’s massive oil spill off the Louisiana coast.
BP boss Tony Hayward met with an Abu Dhabi state investment fund on Wednesday, part of a quest for cash to ward off takeovers and help pay for the worst oil spill in US history.