Singapore: Oil extended gains on Thursday to hold under $92 a barrel, buoyed by signs of higher demand after US crude stockpiles fell more than expected and a cold snap swept through the US Northeast, the region’s largest heating oil market.
Reflecting the overall bullish sentiment, European benchmark ICE Brent crude held steady under $100 a barrel on Thursday, but was off 27-month peaks hit in the previous session.
The market will scour weekly US employment data for more clues to the health of the world’s largest economy. The data released so far has delivered mixed signals. While the country’s unemployment rate has fallen by a hefty amount in December, far fewer workers were added than expected.
“We’re seeing a very strong market in crude after four consecutive sessions of gains. There are expectations of continued growth in demand after the bigger-than-expected drop in US crude stocks,” said Matthew Lewis, an analyst with CMC Markets in Sydney.
“It’s a “risk-on” environment right now, where speculators are happy to see oil creeping higher. We expect the price to hit $100 in the next few weeks, but there will be strong headwinds at this level, with significant profit-taking setting in.”
US crude for February delivery rose 12 cents to $91.98 a barrel by 10:00 am, after settling up 75 cents at a 27-month high of $91.86 a barrel on Wednesday.
London Brent was up 24 cents to $98.36 a barrel, after rising 51 cents to settle at $98.12 a barrel, having touched $98.85 a barrel earlier, its highest level since Oct. 1, 2008.
Brent’s premium to US crude stood at $6.38 a barrel, the highest in eight-month after the premium rose to nearly $6 a barrel last May.
US oil inventories fell for the sixth straight week, slashing supplies by 2.15 million barrels in the week ending 7 January, the Energy Information Administration said.
Gasoline and distillate stockpiles rose, while heating oil inventories fell as cold weather boosted demand in the US Northeast and pushed heating oil futures to 27-month highs.
Further supporting prices was the second major blizzard of the winter, which blanketed the US Northeast and cancelled thousands of flights on Wednesday.
A steady to weaker US dollar on Thursday also supported dollar-priced commodities. The greenback had eased against the euro after a healthy debt auction in Portugal, which somewhat eased euro-zone fiscal worries.
The euro zone’s financing woes have been a drag on investors’ risk appetite, though with signs that highly indebted European countries are able to tap capital markets, albeit at high borrowing costs, risk seeking may return.
Reflecting the firmer sentiment and a rise in risk appetite, the MSCI index of Asia Pacific shares outside Japan was up 0.8%, within striking distance of a 2-1/2-year high that has been tested twice in the past two-month.
On the supply front, worries over supply bottlenecks eased, after Alaska’s key oil pipeline resumed shipments and started pumping 400,000 barrels per day, almost two-thirds of its normal levels, following a four-day shutdown due to a small leak.
Norway also restored production at two North Sea oilfields, helping boost supplies to a tight market.
In the United States, the Labor Department will unveil first-time claims for jobless benefits for the week ended 8 January at 07:00 am. Economists forecast a total of 405,000 new filings, compared with 409,000 in the prior week.