Singapore: Oil steadied above $72 a barrel on Thursday, taking a breather after a rise of more than 2% the previous day after data showed that US crude oil inventories fell much more than expected.
The stock decline, pegged to slowing imports, came a day after data from the American Petroleum Institute showed a sharp build up in gasoline and distillate stocks -- a combination that analysts say could hurt the profitability of US oil refiners.
“I am bullish on oil in the long term, because this combination will pressure margins that will prompt run cuts and eventually pull down product inventories,” said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.
And as US industrial production rose for a second straight month in August, reinforcing views the nation’s recession had ended, energy analysts said that investors’ appetite for risker assets was growing, which would eventually support oil.
Nymex crude for October delivery was down 4 cents at $72.47 a barrel by 0242 GMT, after settling up $1.58 on Wednesday, when prices also got support from a weak US dollar. ICE Brent was down 6 cents at $71.61.
Oil has more than doubled from this year’s low of $32.70 hit on 20 January and is trading 51% below a record high of more than $147 struck in July 2008. The market this year hit a high of $75 on 25 August.
The Energy Information Administration said on Wednesday US crude stocks fell 4.7 million barrels last week, far more than the forecast for a 2.4 million decline in a Reuters poll.
On Tuesday, the American Petroleum Institute had said crude stocks rose by 631,000 barrels last week, while distillate stocks, which include heating oil and diesel fuel, jumped by 5.2 million barrels, against a forecast rise of 1.3 million.
Analysts said although there were no strong fundamentals to lift oil above this year’s high of $75 in the short term, a weakening dollar, buoyant stock markets and positive growth data from the United States would stem a big slide in prices.
“Oil inventories are too high and demand is not too great. But we should remember that there is a big loss of confidence in the dollar and that will lend some support to oil,” Nunan added.
After hitting one-year lows a day earlier, the US dollar stayed on the defensive on Thursday, as investors added long positions in commodity currencies.
Commodities and equities also gained after US industrial production rose a robust 0.8% in August, boosting sentiment towards riskier assets.
Tokyo’s Nikkei average rose 1.2% on Thursday.
A weaker dollar can help fuel purchases of oil and other dollar-denominated commodities as they become relatively less expensive for non-dollar holding investors.
The Organization of the Petroleum Exporting Countries might need to cut its oil supply next year to match an expected fall in demand for the group’s crude, an Opec delegate wrote in a Kuwaiti newspaper on Wednesday.