Tokyo: Oil edged down towards $79 a barrel on Wednesday, giving up some of the previous day’s 1.1% gain on weaker Asian equities and a steady dollar, but losses were limited after industry data showed a surprise large drawdown in US crude inventories.
Crude for December delivery fell 12 cents to $79.43 a barrel by 12:17pm, after settling up 87 cents on Tuesday, its first rise in four days. London Brent crude was down 17 cents at $77.75.
Japan’s Nikkei share average hit a two-week closing low on Wednesday, while the dollar held gains against a basket of currencies. As the dollar strengthens, crude becomes more expensive for holders of foreign currencies.
The American Petroleum Institute data showed after the contract’s settlement on Tuesday that US crude stocks fell by 3.5 million barrels last week, compared with a forecast for a 1.8 million barrel build in a Reuters poll.
The data showed, however, that US gasoline and distillate supplies fell less than expected.
The API report is regarded as a precursor to more authoritative numbers issued by the US Energy Information Administration at 10:30am EDT later on Wednesday.
While the price of crude is up about 78 percent this year, it is still around 46% below a high of more than $147 a barrel reached in July last year.
Oil prices rallied from below $70 a barrel on 7 October to a one-year high of $82 last Wednesday, coinciding with higher global stock indices and a weaker dollar.
“Crude rose on API’s (crude) decline but the gains were pared by profit-taking,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
“After oil hit $82, there are no particular economic indicators to push prices further upwards. But the downside is supported by declining inventories as we head into the peak winter season.”
Crude rose on Tuesday after a report from MasterCard SpendingPulse showed US gasoline demand rose last week - 5.1% higher than year-earlier levels, shrugging off a drop in consumer confidence in the world’s biggest energy user.
Opec oil ministers said this week the producer group may raise output at a meeting in December if global crude stocks fall fast.
Traders also await US gross domestic product (GDP) data, due to be released on Thursday. Analysts expect it to show that the world’s largest economy grew 3.3% in the third quarter, but a lower growth figure could prompt a sell-off in riskier commodities whose prices have rallied this month.