Singapore: Oil extended gains towards $60 a barrel today, after hitting a six-month high the previous day, as US weekly inventory data showed a drawdown versus forecasts for a stock build, boosting hopes for demand recovery in the world’s top energy user.
Oil was also buoyed by a weaker US dollar, which slid to a four-month low against a basket of currencies as growing optimism about the global economy boosted investors’ risk appetite and curbed demand for the greenback as a safe haven.
The market will await the US Energy Information Administration’s (EIA) weekly report 8:00pm to confirm the surprise fall in crude stocks.
April retail sales data and March business inventory figures due later in the day would provide more clues on the health of the US economy.
By 8:10am, US crude for June delivery was up 95 cents at $59.80 a barrel. It settled 35 cents higher at $58.85 a barrel on Tuesday, off an earlier peak of $60.08, its highest level since November. London Brent crude rose $1.10 to $59.04.
“Sentiment has been pretty bullish for the better part of the last month or two, and we believe crude will find $60 as the floor and trend higher in the next few weeks,” said Peter McGuire, managing director, Commodity Warrants Australia.
“Also, we’re moving into the period of higher demand in the northern hemisphere and hurricane season, which could affect supplies from the US Gulf, so we expect a range of $61-$62 pretty soon.”
The American Petroleum Institute (API) said that US crude inventories fell 3.1 million barrels to 370.7 million barrels last week, against a forecast of a 1.4 million barrel increase in a Reuters poll of analysts.
Possibly hinting that consumer confidence is returning, US April retail sales, out at 6:00pm, are expected to remain unchanged from from a 1.2% decline in March, a Reuters poll of economists showed. Excluding automobiles, sales are seen up 0.2% compared with a 0.9% slide the prior month.
Oil has plunged from a record high above $147 a barrel hit last July, but a rally in stock markets over the last few months has helped lift crude up almost 80% from a January low of $32.70 a barrel.
The Organization of Petroleum Exporting Countries (OPEC) is unlikely to cut its oil output target at its meeting later this month, a source close to the group’s president and a second OPEC delegate said on Tuesday.
The producer cartel is also due to release its monthly report later at 3:30pm.