Singapore: Oil reached a 25-month high for a fifth consecutive session on Thursday as strong industrial output sent demand in China to a record and a surplus in top consumer the United States subsided.
US crude for December rose 59 cents to $88.40 a barrel at 12:06pm, after touching $88.45 earlier, its highest since October 2008. ICE Brent added 48 cents to $89.44.
China’s industrial production grew 13.1% in October from a year earlier, boosting oil use in the world’s second-largest consumer by 12% to a record 8.92 million barrels per day (bpd).
Crude inventories in the US unexpectedly fell last week, while declines in fuel stockpiles exceeded forecasts, government data showed on Wednesday, as the nation’s oil demand increased by 2.9% on a rolling four-week basis.
“The oil market is currently dominated by positive news,” said Stefan Graber, a commodities analyst with Credit Suisse in Singapore. “We think prices are on their way for a test of the $90 mark, at least in the Brent market.”
China raised its refinery throughput in October to a new high following the start-up of two new refineries, official data showed on Thursday, on strong domestic fuel consumption ahead of an official price hike at the pumps.
Throughput in the first 10 months expanded 13.9% from a year earlier to 347.95 million tonnes, or 8.36 million bpd.
The record refinery output came despite a slump in China’s crude imports in October. Refiners had plenty of stocks to draw on, following record purchases in the previous month.
An Energy Information Administration (EIA) government report on Wednesday showed a 3.3 million-barrel drawdown in US crude inventories last week, compared with forecasts for a 1.4 million-barrel gain.
Stockpiles of distillate, including heating oil and diesel, fell 5 million barrels as demand for the fuels over the past four weeks jumped 16% from the same period a year earlier.
“Any lingering perception that the oil market is primarily characterised by high inventories does now appear to be in the process of being put to the sword rather brutally,” Barclays Capital analysts headed by Paul Horsnell said.
Gasoline and heating oil led gains in the oil price complex on Wednesday after the bigger-than-expected declines in inventories as demand rose, partly stoked by distillate exports to Europe, even as refiners stepped up production.
US economic growth showed more tentative signs of improving on Wednesday as jobless benefit claims hit a four-month low last week and the international trade gap narrowed in September.
Japan’s Nikkei stock index rose to its highest since June on Thursday, adding to returns that have outstripped US and European markets so far in November, while the blast of Chinese economic data also supported prices of other commodities.
The dollar weakened by less than 0.1% against a basket of currencies.
Chinese consumer price inflation in October quickened to its fastest pace in two years, which is likely to sharpen complaints from Beijing and others that the Federal Reserve’s $600 billion money printing scheme will hasten capital flows to their economies, complicating efforts to keep price pressures at bay.