London: Oil eased below $71 a barrel on Wednesday after a higher-than-forecast rise in US fuel stocks offset positive expectations for the world economy that spurred other markets higher.
NYMEX crude was 17 cents lower at $70.76 a barrel by 4:48pm, after settling up $2.07 on Tuesday, while ICE Brent was down 25 cents at $69.61.
Equities markets and other commodities rose strongly, inspired by comment from the US Federal Reserve chairman Ben Bernanke recovery was gaining momentum.
The FTSEUrofirst 300 index of top European shares cracked the 1,000 mark for the first time since October 2008. and gold hit 18-month highs.
But oil focused on inventory levels in the world’s biggest energy user after figures from US industry body the American Petroleum Institute showed crude stocks had risen, countering expectations for a fall, and product inventories had risen much more than forecast.
The market was waiting to see if government data for release at 8:00pm, would confirm the trends and imply still weak fuel demand.
“We always have a pause on Wednesday for oil,” said BNP Paribas analyst Harry Tchilinguirian. “It’s a normal pitstop for the week for the market to take stock of what’s happening in the US.”
Although fundamentals of supply and demand were big factors on Wednesday, many have said a returning appetite for risk has been the real reason for the market’s recovery from a low of $32.40 hit in December - which was the weakest in nearly five years - to this year’s high of $75 at the end of August.
As all markets have looked to economic data that has suggested the worst of economic recession is over, oil has spent much of the year moving in tandem with gains on equities and other commodities.
It has also been negatively correlated to the dollar, which on Wednesday hit a one-year low against a basket of currencies, as investors, no longer as nervous about potential losses, turned to riskier assets.
A weaker dollar can also fuel buying of oil and other dollar-denominated commodities because they become relatively cheap for non-dollar holding investors.
“The weaker dollar is the supportive element now,” said Toby Hassall, head of research at Commodity Warrants Australia.