Crude prices top 60 dollars on inventory decline
- Source: xinhua
- [10:29 May 21 2009]
- Comments
Crude prices topped 60 US dollars a barrel on Wednesday after the US government reported a surprised decline in crude and gasoline inventories as the driving season approaches.
Light, sweet crude for July delivery rose 1.94 dollars to settle at 62.04 dollars a barrel on the New York Mercantile Exchange, the highest since Nov. 11. In London, Brent crude was up1.67 dollars to settle at 60.59 a barrel on the ICE Futures exchange.
"The decline in gasoline stocks was larger (than) what the market had expected and that turned out to be an important ingredient for the rally being sustained," said Wall Street Strategies' senior research analyst Conley Turner.
According to the US Energy Department's Energy Information Administration (EIA), crude stockpiles dropped by 2.1 million barrels for the week ended May 15 while gasoline inventories dropped by 4.3 million barrels.
"The rally in oil was also supported by the fact that there is a sense of growing optimism among market participants that the economy is not getting any worse and is in fact, turning a corner," said Turner.
"Oil traders are starting to look more at the fundamentals and as opposed to what the stock market is doing. The current trend may well take the commodity above 65 dollars per barrel," he added.
The International Energy Agency forecasted Friday that the global oil demand would hit a 28-year low this year, saying optimism about an economic recovery was not reviving appetite for energy.
The Paris-based organization cut the global daily energy demand to 83.2 million barrels per day in its latest monthly report, three percent lower than last year, and "the sharpest single year's fall since 1981."
Last week, the US Energy Information Administration and the Organization of Petroleum Exporting Countries both lowered crude consumption forecasts.
"This week's EIA figures showed that US oil demand is in no better shape, despite the reported 'green-shoots' in the economy," said Harry Tchilinguirian, commodity derivatives senior oil analyst at BNP Paribas.
"The housing, that led the US economy into recession, in the just released April figures, does not appear to have turned a corner just yet, and while builders may be more optimistic, they do remain cautious," the analyst said in a note to clients.
"The US consumer in turn is holding back on spending as seen in the latest retail sales figures. Total US oil product demand contracted 7.5 percent against last year. Distillate demand, largely dependent in its diesel component on the health of the economy was off again in double digits and finally gasoline is still contracting even as we approach the beginning of the summer driving season," he added.
"Under current economic conditions and high crude oil inventories, we see oil return to 60 dollars per barrel when the world economy was growing at circa 5 percent, spare production capacity in OPEC countries dwindled to just above 2 million barrels per day and supply capacity constraints were emerging," said the analyst.