OIL: Oil Level at $64 a Barrel, on Expected Gasoline Inventory Climb
Crude remains flat at around $64 a barrel in New York, on predicted forecasts of expanding gasoline inventories in the U.S.
Gasoline supplies in the world’s leading energy consuming nation are expected to grow by 850,000 barrels, up from 214.6 million barrels in the Energy Department’s weekly inventory report – set to be released on Wednesday. If correct the climb would represent a sixth consecutive week of gains, during what is typically a peak time for demand – the summer holiday driving season.
Crude inventories however are operating along a trend line in an altogether different direction, and are expected to fall for the tenth time in the last eleven weeks.
U.S. stockpiles of crude declined by 2.25 million barrels in the week ended July 17.
Benchmark light, sweet crude was up by $0.05, at $64.03, by late afternoon in Singapore on electronic trading on the New York Mercantile Exchange (NYMEX).
Traders have been buoyed by improving interim corporate results in the earnings season, which suggest that the U.S. economy is beginning to recover from its recession episode. As a result crude prices have climbed from $58.78 a barrel just two weeks ago.
Ben Westmore, analyst at National Australia Bank, Melbourne, said: “The corporate reports have reinforced the sentiment that the worst is over.”
However, “there haven’t been any tangible signs that consumption has turned around,” he continued. Weak gasoline demand, particularly in the U.S., is a grey loud hanging over the market.
“If we don’t see a pickup in consumption coming through in the data in the next two or three weeks, it will probably cause a slump in both equity and commodity markets,” prophesised Westmore.
On the ICE Futures exchange in London, North Sea Brent crude was up $0.06 at $66.50 a barrel in early day trading.
Meanwhile, one geopolitical event which may swiftly affect the price of oil in the market is the disputed election results in Iran, which is threatening the stability of the oil-producing nation.
The Islamic Republic produces around 3.8 million barrels per day (bpd), and is the world’s third largest producer of oil.
The forward-loaded August contract expires on Wednesday. “Traders are watching whether the August contract expires above $65 a barrel,” commented Masaki Suematsu, broker at Newedge Japan. If it does, “it would set the tone for tomorrow”.
