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Brent crude rises above $114 on US stocks draw

Brent crude rises above $114 on US stocks draw
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First Published: Thu, Jul 07 2011. 10 25 AM IST
Updated: Thu, Jul 07 2011. 10 25 AM IST
Singapore: Brent crude climbed above $114 on Thursday, supported by a more-than-projected drop in US crude stocks and expectations that China’s monetary tightening cycle may be nearing its end.
ICE Brent crude climbed 49 cents to $114.11 a barrel by 7:59am, US crude was at $97.29 a barrel, up 64 cents.
Oil and other commodities fell on Wednesday after China raised interest rates for the third time this year in an attempt to tame rising inflation, but recouped its losses to settle almost flat. Gold was the exception, hitting a two-week high as investors sought safety in the precious metal.
“There is a general consensus that there will be one more rate hike in August and that will be the end of China’s tightening for the year, which is positive for oil demand,” said Gordon Kwan, head of energy research at Mirae Asset Securities in Hong Kong.
“With US economic data not as bad as expected and some resolution to the Greek debt crisis, the way is clear for oil prices to hit new highs this summer.”
China’s annual inflation in June is expected to hit a near three-year peak of 6.3% according to a Reuters poll of 28 economists.
In the U.S., crude stocks fell 3.2 million barrels last week, more than a projected 2.3 million-barrel drawdown, industry group American Petroleum Institute (API) said on Wednesday.
Product inventories registered unexpected declines, the API data showed. Gasoline stocks fell 1.9 million barrels against expectations for an increase of 100,000 barrels. Distillate stocks shed 1.6 million barrels, compared with forecasts for a 700,000 barrel gain.
Brent crude should consolidate between $112.40-$114.48 for one more trading session before rising towards $120, while US crude could hit $99.68, according to technical analyses by Reuters market analyst Wang Tao.
The market will be watching key US jobs data on Friday for evidence that the world’s largest oil consumer had regained its economic footing. US nonfarm payrolls likely rose modestly in June after suffering a setback the prior month.
Growth in the US economy’s vast services sector remained sluggish in June as new orders fell, but economists said a steady employment reading pointed to job growth later in the year.
Concerns over a potential US government debt default, which could lead to higher borrowing costs and tip the economy back into recession, raised fears of weaker demand.
US Treasury officials are discussing options to stave off default if Congress fails to raise the debt limit by the 2 August deadline, sources familiar with the matter said on Wednesday.
A default would undermine confidence in Treasuries, the world’s safest asset and the benchmark for the global bond market, particularly if ratings agencies were to cut the United States’ prized AAA credit rating.
Libya’s ongoing conflict and turmoil in Yemen and Syria continued to support oil prices.
Much of Libya’s state-owned oil tanker fleet remains anchored because of cash flow issues and rebels took control of the village of Al-Qawalish, south-east of Tripoli, after a six-hour battle.
Pirates fired a rocket-propelled grenade into a fuel oil tanker near the Yemeni port of Aden, but the vessel and its cargo were recovered, the ship manager said.
In Syria, forces rounded up dozens of people around Hama, a day after killing 22 people, activists said.
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First Published: Thu, Jul 07 2011. 10 25 AM IST
More Topics: Markets | Oil | Commodity | Energy | Brent |