Singapore: Oil inched up above $72 on Wednesday after sliding 3% from its highest since last October a day ago, hit by industry figures showing a hefty rise in US crude stocks and overshadowing upbeat economic data.
Investors viewed prices touching 10-month highs near $75 on Tuesday, capping oil’s jump of 65% this year, as a good reason to take profits, but a rebound in Asian shares lifted sentiment.
US crude for October gained 16 cents to $72.21 a barrel by 1:57pm, after falling $2.32 on Tuesday, for its sharpest percentage drop since 14 August.
Brent crude rose 12 cents to $71.94 a barrel after losing $2.44 the previous day.
“A lot of people are expecting a build in crude stocks because last week’s draw was large,” said Tony Nunan, risk manager at Tokyo-based Mitsubishi Corp.
“People are holding stocks offshore and sooner or later these would show in crude stocks in the US.”
American Petroleum Institute (API) data showed an unexpected 4.3 million-barrel build in US crude stocks last week, confounding analysts’ expectations for a 1.1-million-barrel fall, and coming after the 8.4-million-barrel drop the week before.
Gasoline stocks fell 1.8 million barrels, the API said, more than the 1 million-barrel drop predicted in the Reuters poll, while distillates declined 146,000 barrels, versus forecasts for a 300,000-barrel rise.
Nunan noted that while the figures from industry body API have occasionally diverged from those of the government Energy Information Agency (EIA), due out at 8:00pm, on Wednesday, the two have been consistent for the previous two weeks.
High global oil stocks
As crude oil trimmed its losses and volatile Chinese shares rebounded, the yen and US dollar surrendered early gains, helping higher-yielding and commodity-linked currencies, such as the Australian and Canadian dollar, back from the day’s lows.
Oil had surged in earlier US trade after reports showed increased consumer confidence and higher home prices in the world’s top energy user, adding to a slew of encouraging economic indicators, and Wall Street’s jump to the highest levels since October’s plunge.
“The economic data is important, but a lot of the positive economic figures had been built into the prices,” said Nunan.
“$74 is a strong crude price,” he said, adding that the market was already at levels most people were expecting for the end of the year, by when the world is expected to be seeing real economic growth.
Venezuela also asserted that global oil stocks were too high, and that Opec is not expected to raise output at its September meeting.
Oil Minister Rafael Ramirez said oil could reach an average of $70 a barrel by year-end if “current conditions hold”, and could go as high as an average $75 in the last quarter. “Inventories have declined but they remain above average. We need for them to come down to the average levels,” Ramirez added.
Another Opec member, Iran, said oil demand was set to increase next year after this year’s decline.
“Considering the relative recovery of the global economy, it is expected that oil demand in the year 2010 will be increased between 500,000 and 1 million barrels,” the Mehr News Agency quoted its Opec governor Mohammad Ali Khatibi as saying.