Singapore: Oil was steady near $79 per barrel on Tuesday as forecasts indicated a trend of falling crude inventories and rising refined product stockpiles in the United States would continue.
US crude inventories probably fell 1.8 million barrels last week, a Reuters survey showed, while supplies of distillate fuel including diesel may have climbed for the ninth consecutive week and gasoline for the fifth, even as demand peaks with summer.
Over the past seven weeks, investors have trimmed long positions as oil approached $80 a barrel, while they have increased bets for higher prices as it fell towards $70, said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
“Under current market conditions, people are thinking that oil would be overvalued at $80,” Emori said. “Evidence of much stronger demand would be quite a positive indicator for the crude market. Once oil hits $80, it can go up to $85 very quickly on short-covering.”
US crude touched $79.60 on Friday, the highest price since early May, and has hovered around $79 for the past two days. On Tuesday, the September contract shed 2 cents to $78.96 a barrel at 0307 GMT, while ICE Brent added 6 cents to $77.56.
On Monday, oil ended unchanged as stronger US home sales led to economic optimism, while some oil output was restored in the Gulf of Mexico after Tropical Storm Bonnie fizzled out.
As much as 826,000 barrels a day of US production was shut in by Saturday, according to government estimates. By Monday, companies had restored about half of the idled output and operations were returning to normal.
Government data showed US sales of new homes rebounded strongly in June from May’s record low, driving the number of houses on the market to the lowest level in more than four decades.
The positive economic data helped lift oil and equities. The Nikkei benchmark inched higher on Tuesday with support from robust earnings at home and the pickup in US new home sales, after gains on the Wall Street that were also aided by an upbeat outlook from FedEx Corp.
Industry group the American Petroleum Institute will publish data on U.S. inventories at 2030 GMT on Tuesday, followed by government statistics from the Energy Information Administration on Wednesday at 8:00pm.
For distillates the average forecast was for an increase of 1.6 million barrels in the week to 23 July, while gasoline stocks probably gained 600,000 barrels, the Reuters poll showed.