Oil rose for a third day today, adding 0.7 per cent after an industry report showed a larger-than-expected decline in US crude stocks, bolstering the view that a glut will dwindle as demand resurges.
Inventories fell 4.5 million barrels last week, the American Petroleum Institute said yesterday, more than four times as much as expected.
The supply report allowed the oil market to temporarily shrug off moves in Asian equities, which fell today. Crude futures traders have adopted stock indices as a barometer for perceptions on risk, growth and energy demand.
US crude for July delivery rose 51 cents to $72.50 a barrel at 4.21am, still down 17 per cent from a 19-month high above $87 in early May. July ICE Brent was trading almost at parity, up 15 cents at $72.45.
"The US economy is certainly in recovery mode; oil consumption seems to be recovering, with gasoline and distillate fuel demand stronger," said David Moore, an analyst at the Commonwealth Bank of Australia.
The Energy Information Administration (EIA) will publish more closely watched government statistics on US oil inventories and demand on today at 2.30pm.
The drop in US crude inventories reported by the API was matched by an equivalent increase in product supplies. Gasoline stocks posted an unexpected increase of 1.5 million barrels and distillates, including heating oil and diesel, logged a larger-than-forecast gain of 3 million barrels.
A report by Fitch Ratings that the Britain faced a "formidable" fiscal challenge pushed European stocks to near two-week closing lows yesterday, while Asian stocks also fell today.
Adding to the uncertainty, US Federal Reserve officials yesterday gave conflicting signals on the direction of interest rates, highlighting an increasingly important split within the central bank.
"Changes in market views about the economy will continue to affect all risky markets, and commodities are no exception," JP Morgan said in a report dated June 8th.
"The key driver however is the strength of developing market oil demand, with diesel demand increasing in line with the recovery in global trade," the bank said.
"Crude oil demand will increase sharply in the coming weeks as Asian refineries ramp up throughput as seasonal maintenance comes to an end."
Chinese trade data for May, including oil statistics, will be published tomorrow, followed by industrial production for the same month on Friday, with growth forecast at 17.1 per cent in a Reuters survey, down from a 17.8 per cent gain in April.
Reuters