Singapore: Oil edged higher towards $72 on 8 June as forecasts for a drop in US inventories helped stabilise a volatile market driven by concerns that Europe’s debt crisis would cut into energy demand.
US crude stockpiles probably fell by 900,000 barrels last week as imports declined, a Reuters poll showed on 7 June, in their second straight weekly decline.
Finance ministers from the debt-stricken euro zone sought to restore financial markets’ confidence on 7 June by agreeing how to deploy a vast anti-contagion programme if needed by struggling members.
Efforts to contain the crisis came after the Hungarian government sent mixed signals about the health of its economy, rattling financial markets and sending crude below $70 on 7 June for the first time in almost two weeks.
Prices of front-month US crude, down 18% from a 19-month high above $87 in early May, on 8 June gained 11 cents to $71.55 by 0251 GMT, after earlier touching a high of $71.74. ICE Brent crude was unchanged at $72.12.
“The heavy sell-off since Friday seems to be finished,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
“The market has been supported by short covering, and some people are feeling that $70 is quite cheap according to market fundamentals. The level of US crude inventory is still quite high, but people are looking at a trend of decreases.”
Crude supplies in top consumer the United States fell for the first time in seven weeks in the week to 28 May, following an almost unbroken stretch of gains going back to late January.
Gasoline stockpiles were forecast up just 100,000 barrels last week, after four straight weeks of drawdowns, including a hefty decline of 2.6 million barrels in the week to 28 May.
The forecast for distillate stocks called for an average increase of 600,000 barrels, following a modest build the week before and two consecutive moderate declines prior to that.
Industry group American Petroleum Institute will publish inventory figures on 8 June at 2030 GMT, while government statistics from the Energy Information Administration will follow on 9 June at 1430 GMT.
Hungary’s new centre-right rulers, who alarmed markets last week by suggesting the country could face a Greek-style crisis, tried to reassure investors on Monday by pledging to stick to deficit-cutting targets their predecessors agreed with the International Monetary Fund.
“Sovereign risk probably will have an impact on the economy, and oil demand in Europe may not be increasing,” Emori said, adding that prices could potentially fall below $60 a barrel in the next year.
“Economic indicators in the US are not really improving much,” he said.
The US economy added fewer jobs than expected in May, a report showed on Friday, sending equities and commodities markets sharply lower.