London: Oil topped $71 a barrel on Wednesday for the first time in 7-months on signs demand for crude could be recovering, with US crude stocks falling last week and the Department of Energy raising its forecast for global demand.
The American Petroleum Institute (API) reported US crude stocks fell by a massive 6 million barrels in the week ended 5 June, topping analysts’ expectations for a 400,000-barrel draw, as refiners ramped up production.
The crude stock drawdown in the world’s largest energy consumer added to a sense weak demand is bottoming, with the US Energy Information Administration (EIA) - the statisical arm of the DOE - raising its 2009 demand forecast for the first time since September.
US light crude for July delivery rose $1.35 to $71.36 a barrel by 2:15pm, after ending Tuesday at $70.01, the first settlement above $70 since early November.
London Brent crude gained $1.17 to $70.79.
“The crude stock draw and the EIA demand revision has bolstered hopes demand is starting to improve,” VTB Capital analyst Andrey Kryuchenkov said.
Oil has more than doubled from the low $30s hit this winter as investors have started to price in hopes for an economic recovery which should boost oil demand.
Output cuts by the Organization of the Petroleum Exporting Countries (Opec) totalling 4.2 million bpd since September have also helped prices to recover.
The group has succesfully complied with around 80% of its cuts, but analysts have cautioned this is likely to slip as prices rise.
Kuwait’s oil minister said on Wednesday the producer group - responsible for more than a third of the world’s crude output - could raise production if oil prices rose towards $100 a barrel.
Economists have voiced concerns the rapid run-up in crude prices could derail any fragile economic recovery.
Prices could gain further on Wednesday if the EIA confirms the API’s fall in crude inventories, in its own data on Wednesday to be released later today.