Oil above $72 on surprise fall in US inventories

Oil above $72 on surprise fall in US inventories

Singapore: Oil rose for a third session to above $72 a barrel on Thursday, buoyed by a surprisingly large drawdown in US crude and distillate stockpiles, easing worries over flagging demand in the world’s top energy user.

Crude has risen for three days in a row after a nine-session rout, in which prices plummeted 11.3% from levels above $78 a barrel. Analysts attributed the fall to persistently poor fuel demand and bloated US oil inventories.

A report from the US Energy Information Administration on Wednesday showed crude inventories declined by 3.7 million barrels last week, eclipsing analyst forecasts for a more modest draw of 1.8 million barrels.

A 2.9-million-barrel draw in US distillate stocks, which include heating oil and diesel, was almost five times bigger than the 600,000-barrel dip analysts expected, while gasoline stocks grew less than expected.

Crude for January delivery rose 6 cents to $72.72 a barrel by 0220 GMT, after settling up $1.97 a barrel at $72.66 on Wednesday. London Brent crude was up 16 cents at $74.45.

“Inventory was the single issue that was dragging down the market -- there’s no question about it," said Tony Nunan, risk manager with Tokyo-based Mitsubishi Corp.

“The economy may not be falling any more, but we’re not out of the woods yet -- we still have a lot of inventory and fuel demand remains anaemic. We’re going to see this pattern of volatility in prices, with swings determined by inventory levels."

A further drawdown in distillate stockpiles could be on the cards, after a 10-day National Weather Service forecast earlier this week called for lower-than-normal temperatures in most of the eastern US, the world’s biggest regional consumer of heating oil.

Economic data unveiled this week appears to have placed the US on track for a gradual recovery. Weekly jobless claims, due later, are expected to confirm a brightening outlook for the world’s largest economy.

Economists forecast a total of 465,000 new filings for jobless benefits for the week ended 12 December, down from 474,000 in the prior week.

The US Federal Reserve opted on Wednesday to hold interest rates near zero amid “subdued" inflation risks, and said rates should remain exceptionally low for an extended time to help spur an economic recovery.

The US dollar retained its strength on Thursday, steadying against the yen and hitting its highest level in three months against the euro, after the Federal Reserve voiced some optimism about a stabilising economy.

On the supply front, the Organization of the Petroleum Exporting Countries, whose daily production meets around a third of global crude demand, will convene in Angola to discuss output policy on 22 December.

Few expect OPEC to scale back the 4.2 million barrels a day output cuts the group has agreed upon since last year. Most members are comfortable with the current range of oil prices.