Singapore: World oil prices steadied in Asian trade on Thursday after a rebound of more than four dollars driven by an unexpected decline in US petrol stockpiles, analysts said.
New York’s main contract, light sweet crude for September delivery, fell 11 cents to $126.66 a barrel.
The contract rallied $4.58 to $126.77 at the close of floor trading Wednesday on the New York Mercantile Exchange.
Brent North Sea crude for September delivery was 12 cents lower at $126.98 a barrel following a rally of $4.39 a barrel to $127.10 Wednesday in London.
“The US Department of Energy’s (DoE’s) data on the nation’s energy stockpiles — particularly petrol — were the main catalyst for Wednesday’s rise in prices,” said David Moore, a Commonwealth Bank of Australia analyst in Sydney.
The market “recalibrated” with its sharp movement on Wednesday and nothing had emerged Thursday to move it further, Moore said.
Gasoline or petrol inventories sank by 3.5 million barrels in the week ending July 25, the DoE said in its regular weekly report.
That surprised traders because market expectations had been for a weekly gain of 400,000 barrels.
The DoE added that crude reserves fell by 100,000 barrels. That was the second weekly decline in a row and compared with analysts’ consensus forecasts for a heavier drop of 1.25 million barrels.
Thierry Lefrancois, an analyst at Natixis, said the big slide in gasoline was behind this huge move in prices. Traders fretted about the adequacy of US motor fuel supplies despite reports showing a decline in driving.
Prior to their rally on Wednesday, oil prices had dropped more than 17% since touching record highs above $147 a barrel on July 11. Analysts cited slackening oil demand in the United States as a factor behind the sharp decline in prices.
“It is clear that consumption is slowing” in response to weak economic conditions, said Antoine Halff, an analyst at Newedge Group.
Moore cautioned against concluding too much from the latest DoE figures, particularly because gasoline inventories had been rising. “DoE data can be very erratic from week to week,” he said.
Despite the draw in petrol stocks, they were still 7.019 million barrels above the five-year average and 8.84 million barrels above year-ago levels, Platts oil analyst Linda Rafield wrote in a report.
Moore said tensions between the West and Iran were a secondary factor behind Wednesday’s price rally.
The United States reaffirmed a deadline for Iran to give a final answer to world powers seeking a breakthrough in a standoff over Iran’s nuclear programme.
Iran, the world’s fourth largest crude producer, denies Western claims it is seeking to build atomic weapons.