Singapore: Oil prices steadied above $60 a barrel on Wednesday after touching a six-month high a day earlier, as investors awaited more US oil inventory data and kept a close watch on equities for direction.
Oil prices had gained this week as fire struck gasoline making units at US refineries, lifting US gasoline futures to a seven-month high settlement on Tuesday on supply concerns leading into the peak summer driving season.
US crude inched down 1 cent to $60.09 a barrel by 08:13am, and London Brent fell 4 cents to $58.88.
“Oil prices are mostly tracking stocks,” said Michelle Kwek, an analyst at Informa Global Markets in Singapore. ”The Nikkei is paring early gains and the U.S. S&P went down last night.”
Tokyo’s Nikkei average was up 0.4% by the midday trading break after rising more than 1% earlier. Wall Street slipped on Tuesday as financial stocks sank and housing data proved disappointing.
Commodities markets have closely tracked the stock market in recent months as dealers seek signs of economic health.
“The move from $50 to $60 is quite abrupt. I don’t think oil prices can go much higher at this point... I think a lot of oil’s rise has been driven by speculation that the worst is over, but is the real demand there yet?” Kwek said.
Oil prices have been on an upward trend since mid-April in equity-led rallies. They have recovered from below $33 in December after a plunge from record highs above $147 in July.
Traders will also look out for inventory data from the US Energy Information Administration (EIA) due out later in the day as the country heads into the vacation season.
US crude stockpiles probably fell last week by 200,000 barrels, while gasoline inventories were down by 1.2 million barrels and distillate stocks up 1.0 million barrels, an expanded Reuters poll showed.
The American Petroleum Institute (API) said on Tuesday US crude stocks fell by a much larger than expected 4.5 million barrels in the week to 15 May.
The Organization of Petroleum Exporting Countries (Opec), which has agreed to cut 4.2 million barrels per day of output since September in a bid to prop up oil prices, has no reason to cut crude production when it next meets on 28 May, Algerian Energy and Mines minister Chakib Khelil said.
”If the price stays at this level... I don’t think there will be any reason to cut,” he said.
Oil prices have also been buoyed this week by unrest in Opec member Nigeria. The country’s security forces clashed with militants on Tuesday close to an oil flow station in the western Niger Delta operated by Chevron.
Africa’s top oil and gas exporter, which has sent three battalions of ground troops to search for militants on Tuesday, is on alert for retaliatory attacks after launching its biggest offensive for several years last week against the militants.