Oil rises towards $72 on inventory drop
Tuesday's API data show fall in crude stocks.
August 25, 2010 1:31 by Reuters
Crude bounced from a seven-week low on Wednesday as investors looked for relief in U.S. oil inventory numbers due later in the day, heartened by separate Tuesday figures indicating a fall in crude stocks.
Analysts say Tuesday’s 1.8 million barrel drop in U.S. crude inventories from the American Petroleum Institute could be confirmed by parallel data on stocks to be published at 1430 GMT by the U.S. government’s Energy Information Administration.
Traders also said oil might have been oversold after a sharp fall in the price since early August. “The API stats yesterday showed a drawdown in U.S. crude inventories, which made people less convinced that the consensus for crude inventory building holds,” said Andy Sommer of energy trading firm EGL in Switzerland.
“I think people are now going into a wait-and-see stance for the EIA numbers.” [API/S]
Sommer added: “With the price around $70, $72, $75, it will be harder especially for more expensive oil producers to produce economically, and that will provide a kind of floor for oil prices.”
U.S. crude for October delivery was up 13 cents on the day to $71.76 a barrel by 1100 GMT. It recovered after trading as low as $71.32 earlier in the day — an exact repeat of Tuesday’s trough, which was the lowest intraday price since July 6.
October ICE Brent rose 25 cents to $72.63 a barrel.
Oil markets rose despite a poor showing by equity markets, with the disconnect bucking a recent trend. Asian shares fell sharply on Wednesday, including a 1.7 percent decline in the Nikkei 225. European showed moderate falls.
Nevertheless, analysts say that oil currently needs major news such as the inventory figures to prevent a move in line with equities, since the two markets remain highly positively correlated.
U.S. crude stocks posted a surprise drop in the week ended Aug. 20, according to a weekly report from the American Petroleum Institute late on Tuesday. Forecasts for Wednesday’s EIA figures are for a 200,000-barrel gain, a Reuters poll showed. [EIA/S]
But U.S. gasoline stockpiles unexpectedly rose by almost 700,000 barrels last week, the API said, while inventories of distillate fuel, including diesel, increased by a larger-than-predicted 1.9 million barrels.
Last Wednesday, the EIA said U.S. combined commercial stockpiles of crude and refined products in the week to Aug. 13 hit the highest level since weekly records began in 1990 and the highest since 1980 according to the agency’s monthly data.
Hurricane Danielle in the central Atlantic Ocean unexpectedly weakened again and was downgraded to a tropical storm, the U.S. National Hurricane Center said in its latest advisory.
Forecasters have revised down their expectations of the oil price both for this year and next, a Reuters poll revealed on Wednesday.
(Additional reporting by Alejandro Barbajosa; editing by Keiron Henderson and Jane Baird)