MW: Crude rises above $61 as inventories seen falling
Crude-oil futures rose Wednesday to their highest level in more than six months, topping $61 a barrel as investors expected U.S. government data to show a decline in last week's crude inventories.
Crude for July delivery, the new front-month contract, gained $1.49, or 2.5%, to $61.60 a barrel in North American electronic trading. Front-month contracts haven't closed above $60 a barrel since Nov. 10.
The Energy Information Administration is scheduled to release last week's petroleum data at 10:30 a.m. Eastern time. Analysts surveyed by energy-information provider Platts expect a 1.5-million-barrel drop in U.S. crude inventories.
Reinforcing the expectation, the American Petroleum Institute, an industry group, reported Tuesday after oil's floor trading closed that inventories dropped by 4.5 million barrels last week. The EIA and the API use different criteria for gauging inventory levels.
"The API data were very bullish," said Phil Flynn, vice president at futures trading firm Alaron Trading. "If the EIA data confirm the big decline, we might blow the top of this puppy."
The EIA had reported last week that crude inventories fell in the week ended May 8 for the first week in 10, as the country imported less oil. Inventories had been hovering around the highest level in 19 years before the EIA reported the drop.
The decline, however, was not driven by rising demand but buy a sharp drop in imports. Oil demand still remained week, last week's EIA report showed, leading some investors to believe that the recent rally in crude prices was overdone. See more about inventories.
Oil has surged more than 70% since February's low near $34 a barrel.
Gains in oil prices were mainly "due to the vagaries of equity markets and a weakened U.S. dollar than inventories," said Eugen Weinberg, an analyst at Commerzbank, in a note.
"Relying on equity markets and the dollar to support oil prices alone will be insufficient. For prices to be sustained at current levels in the coming weeks, further evidence of lower inventories needs to materialize," she added.
Also in energy trading Wednesay, June-reformulated gasoline rose 2.98 cents, or 1.6%, to $1.8423 a gallon, and June heating oil gained 1.28 cents, or 0.9% to $1.4992 a gallon.
Natural gas for June delivery lost $3.80, or 1%, to $3.876 per million British thermal units.
