BD:US oil hits 14-month high on declining stockpile
SINGAPORE — Oil prices on both sides of the Atlantic rose on Wednesday, with the US benchmark climbing to a 14-month high near $105 a barrel, buoyed by a bigger than expected drop in inventory in top oil consumer the US.
But concern about a sluggish Chinese economy, underlined by bleak June trade data, kept a lid on oil price gains.
US crude rose 90c to $104.43 a barrel by 6.25am GMT, after hitting a 14-month high of $104.79.
Brent edged up 14c at $107.95 a barrel, slipping from a high of $108.12 after the data from China that fuelled worries about demand from the world’s second-biggest oil consumer.
"China was the big focus for a while but now it seems the US is the main driver for both bullish and bearish views," Mitsubishi risk manager Tony Nunan said.
"Suddenly, it seems investors have caught on to (US oil) as the investment of choice," he said.
The spread between Brent and US oil narrowed 76c to $3.52 as the US benchmark gained on data showing a drawdown in stocks.
US crude stocks fell nearly 9-million barrels last week, compared with analysts’ expectations of a drop of 3.3-million barrels, according to the American Petroleum Institute. The US Energy Information Administration is scheduled to release its inventory report on Wednesday.
But analysts pointed out that the drop in US stockpiles, which was boosting oil prices, was because of the summer driving season there and the global demand prospects remained weak.
"The market is too high from a fundamentals point of view. It is riding on the back of expectations of a revival in US demand. But the revival we are seeing now is more seasonal, and there is no clear indication yet of a steady revival in demand," Barratt’s Bulletin CEO Jonathan Barratt said in Sydney.
Economic outlook
China, the world’s second-biggest economy, warned of a "grim" outlook for trade as it surprised markets by reporting a fall in June exports and imports when both had been expected to rise.
Its crude imports for the first half of 2013 fell 1.4% from a year ago.
"I expect crude oil imports will continue to slow because the overall economy is slowing," Mr Barratt said.
He said that, given the bleak demand outlook, Brent should be less than $100 a barrel and US crude oil at about $85.
The International Monetary Fund trimmed its global growth forecast on Tuesday for the fifth time since early 2012, due to a slowdown in emerging economies and recession-struck Europe, which also put a lid on oil prices.
But geopolitical risks remained and investors continued to watch the situation in Egypt, helping cushion oil prices.
Egypt’s interim authorities, boosted by $8bn in Gulf aid, start work on forming a cabinet on Wednesday, a week after the elected Islamist president was ousted by the army leading to a wave of violence in which at least 90 people were killed.
