Oil rose to hold above $69 today after a report showing a drop in US gasoline stockpiles signalled a glut centred on the world's top consumer will ease as motor fuel demand reaches its summer peak.
Prices slumped more than 2 per cent on Monday after investors shunned riskier assets, seeking the relative safety of the dollar and gold as concern spread about the health of European banks and tension between North and South Korea escalated.
But a late rebound in US equity markets yesterday lifted sentiment in the oil market, aided by a larger-than-expected decline of 3.2 million barrels in US gasoline stockpiles last week, reported by the American Petroleum Institute.
Crude inventories at Cushing, Oklahoma, the pricing point for US crude, fell from record levels, the API said.
US crude for July delivery climbed as much as $1.38 to $70.13 a barrel and was up 51 cents at $69.26 at 7.07am, still down 20 per cent from its early-May 19th-month high above $87.
ICE Brent crude gained 18 cents to $69.73, after falling below $70 for the first time since February yesterday. That was less than $1 higher than front-month US crude, reducing its premium from about $6 earlier this month.
A stabilisation of prices at or above $70 would likely spare the Organisation of the Petroleum Exporting Countries the need to convene an emergency meeting to discuss supply policy. Gulf oil ministers yesterday played down the slide in oil prices to below that level.
The oil market also focused on gains in Asian stock markets today, which edged up from nine-month lows as value investors hunted for bargains. Crude shrugged off the euro's decline, rising despite the dollar being unchanged against a basket of currencies.
The US driving season, when gasoline demand peaks as summer vacationers take to the roads, runs from the Memorial Day holiday in late May to the Labour Day holiday in early September.
US refineries are also cranking up operations as they return from spring maintenance, absorbing larger volumes of crude.
Analysts had expected US gasoline stockpiles to have declined by just 200,000 barrels. Government statistics from the Energy Information Administration will follow to day at 2.30pm.
The API said distillates including heating oil and diesel rose by 1.5 million barrels versus expectations of no change, while the nation's crude stockpiles rose 616,000 barrels. At Cushing, stocks fell 772,000 barrels from a record 37.99 million.
World oil demand will continue to grow through 2030, but demand that year will be about 2.5 per cent less than previously thought due to use of renewables and higher oil prices, the EIA said in an annual long-term forecast yesterday.
Reuters