BLBG: Oil Gives Up Earlier Gains as OPEC Cuts 2009 Demand Forecast
Oil gave up earlier gains as the dollar rebounded against the euro and OPEC reduced its forecast for oil demand this year.
The Organization of Petroleum Exporting Countries cut its 2009 forecast for oil demand for a ninth straight month and said it increased production in April for the first time since July. The dollar recovered earlier losses against the euro, reducing the appeal of oil as an inflation hedge.
“We are not seeing any fundamental information that is supportive” for oil prices, said Gareth Lewis-Davies, oil market analyst at Dresdner Kleinwort in London. “If demand is weak, OPEC needs to do more to have the same price effect. At the same time, they are not sticking to their quota.”
Crude oil for June delivery, which rose as much 1.8 percent earlier today, pared those gains and traded up 39 cents at $59.98 a barrel at 1:25 p.m. London time on the New York Mercantile Exchange. Yesterday, it climbed as much as 2.7 percent to $60.08 a barrel before closing at $58.85, the highest settlement since Nov. 11.
Options for June-delivery Nymex crude contracts will expire tomorrow, and the majority of trading is centered on a strike price of $60 for options to buy and sell. The underlying June futures will expire on May 19.
OPEC lowered its estimate for global demand this year by 150,000 barrels a day to 84.03 million barrels. Demand will contract by 1.57 million barrels a day this year, or 1.8 percent, the Vienna-based producer group said.
OPEC boosted oil production last month for the first time since July, exceeding its quota by 967,000 barrels a day and backtracking on its implementation of supply cuts intended to stem falling prices.
IEA Forecast
The International Energy Agency won’t alter its global oil demand projections much when it issues its next monthly oil market report tomorrow, the agency’s executive director Nobuo Tanaka said. “Projection of demand will not change very much this time,” Tanaka said in Paris today.
Brent crude oil for June settlement fell 2 cents to $57.96 a barrel at 1:15 p.m. on London’s ICE Futures Europe exchange. The contract was up as much as 1.9 percent earlier in the day.
The U.S. Energy Department report on inventories is expected to show a 1 million barrels gain, according to an analysts’ survey. U.S. oil supplies fell by 3.13 million barrels to 370.7 million last week, the American Petroleum Institute said late yesterday.
Same Direction
Totals from the API and the government moved in the same direction 75 percent of the time over the past four years, Bloomberg data shows.
Supplies rose to 375.3 million barrels in the week ended May 1, the highest since September 1990, the Energy Department said on May 6.
Analysts are split over whether gasoline stockpiles rose or fell last week. Supplies of distillate fuel, a category that includes heating oil and diesel, probably increased 1.25 million barrels, according to the Bloomberg News survey. The department is scheduled to release its weekly petroleum inventory report today at 10:30 a.m. in Washington.
Gasoline futures for June delivery rose 1.57 cents, or 0.9 percent, to $1.6836 a gallon at 1:15 p.m. in London on the Nymex. The contract yesterday dropped 1.23 cents, or 0.7 percent, to settle at $1.6679 a gallon.
