Oil set for 5% weekly gain on US demand

Oil set for 5% weekly gain on US demand

Singapore: Oil was headed for a five-percent weekly gain, the biggest since May, after government statistics showed robust US demand growth and falling inventories, while positive economic indicators lifted sentiment across markets.

Asian equities inched higher on Friday, after solid earnings from key retail chains and a better than expected weekly US jobs report sent Wall Street higher on Thurday.

US crude inventories fell 5 million barrels last week, more than twice as much as expected, while the nation’s demand for distillate fuels including heating oil and diesel soared 30 percent in the past four weeks from a year earlier, the Energy Information Administration said on Thursday.

“Oil was probably sold too heavily to the downside," said Peter McGuire, managing director at CWA Global Markets in Sydney. “Distillate usage is a wonderful indicator for tracking industrial production, it’s a great sign of a turnaround."

US crude for August rose 29 cents to $75.73 a barrel on Friday by 8:22am, on the New York Mercantile Exchange, after touching an intraday peak of $76 on Thursday, the highest price this month. ICE Brent gained 38 cents to $75.09.

Oil was headed for its fourth-biggest weekly gain of the year.

But front-month WTI was still well below a 19-month peak above $87 reached in early May, having rebounded sharply from a trough below $65 on 20 May.

Wall Street staged a late-day surge on Thursday, extending a rally to three days on upbeat US jobs data that also boosted European shares to 10-day highs and the euro to a two-week peak.

“With equity markets rebounding, there is a little bit more positive sentiment," McGuire said.

The International Monetary Fund raised its 2010 global growth forecast on Thursday, citing an expansion in Asia and in US private sector demand. The IMF raised its 2010 global output growth forecast to 4.6% from 4.2% after a fall of 0.6 percent in 2009.

The IMF said a double-dip recession was unlikely, which helped boost the outlook for oil demand.

Oil inventories at the key US Cushing, Oklahoma, crude oil hub fell more than 350,000 barrels in the week to 6 July to 38.9 million barrels, figures from energy industry data provider Genscape showed on Thursday.

US gasoline inventories unexpectedly rose by 1.32 million barrels last week, EIA data showed, even after consumption increased by 2.4% over the past four weeks from a year earlier. Distillate stocks rose a smaller-than-expected 321,000 barrels.

The Obama administration declined to label China a currency manipulator in a long-delayed report on Thursday, spurring fresh calls from US lawmakers for tough new steps to pressure Beijing.