Oil rebounds surprise fall in US crude stocks, MidEast woes
US oil prices recovered to nearly USD 85 a barrel on Wednesday, lifted by an unexpected fall in weekly crude stocks, while London Brent rose past USD102, underpinned by continuing protests in the Middle East.
February 16, 2011 / 14:42 IST
US oil prices recovered to nearly USD 85 a barrel on Wednesday, lifted by an unexpected fall in weekly crude stocks, while London Brent rose past USD102, underpinned by continuing protests in the Middle East.
Traders will scour the Energy Information Administration's (EIA) report, to be unveiled later, for confirmation of the decline in US weekly crude inventories seen in Tuesday's data from the American Petroleum Institute (API).A slew of data, including US January housing starts and the Producer Price Index (PPI), together with minutes from the last Federal Open Market Committee (FOMC) meeting, due later, will shed more light on the health of the world's top energy user."All eyes will be on the EIA inventory data coming out later, to see if it confirms the decline in the API data. There are still expectations for a build in weekly crude stocks," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp. "Cushing stocks are the key factor in blowing out the spread between WTI and Brent, and it looks like this gap will persist for several more months, at least until the summer driving season, when demand picks up," he added.U.S. crude for March delivery gained 40 cents to USD 84.72 a barrel by 0725 GMT, after settling 49 cents weaker at USD 84.32 a barrel.Brent crude for April delivery rose 38 cents to USD 102.02 a barrel, after settling USD 1.44 lower at USD 101.64 in the previous session. Prices had hit a 29-month peak of USD 104.30 on Monday.The spread between the two grades was just above USD 14, after hitting a record of USD 16.27 a barrel last week."We are near the bottom for WTI -- it should hold around the mid-USD 80s, while Brent could close the gap a bit by easing to the high-USD 90s over the next week or so," Nunan added.A bullish target at USD 105.80 a barrel is aborted for Brent and a bearish target has been established at USD 100.42, Reuters technical analyst Wang Tao said. US crude stocks fell by 354,000 barrels last week as imports dropped, the API said. Analysts polled by Reuters had expected a 2.2 million-barrel rise in crude stocks. The EIA will issue its report at 10:30 am EST. Middle east volatileIn the Middle East, protests in Libya, Bahrain, Iran and Yemen, after Egyptian President Hosni Mubarak resigned last week, continued to support Brent crude prices.Several hundred people angry at the arrest of a rights campaigner clashed with police and government supporters in the eastern Libyan city of Benghazi, a witness and local media said. Libyan state television said separately rallies were being held across the oil exporting country on Wednesday in support of Libyan leader Muammar Gaddafi. Shi'ite protesters prepared to camp out in Bahrain's capital on Tuesday, after a day of protests in which a man was shot dead in clashes with police at a funeral for a demonstrator shot the day before. Hundreds of anti-government protesters and government loyalists fought with rocks and batons in Sanaa, the Yemeni capital, in political unrest fueled by the Egyptian uprising.Further boosting Brent crude were signs of declining supplies. North Sea oil output will fall by 8.6% in March from a year earlier, illustrating the gradual drop in supply from the home of the Brent benchmark used to value two-thirds of global oil, data compiled by Reuters showed.US economic data due for release later could reinforce signs of an anaemic recovery in the world's largest economy.The Commerce Department will release housing starts and permits for January at 1330 GMT, while the Labor Department will unveil the January Producer Price Index. The FOMC will issue minutes from its policy-setting meeting of January 25-26 at 1900 GMT.The dollar index, which tracks the greenback's performance against a basket of major currencies, eased 0.36% to 78.289. The dollar had hit an eight-week high against the Japanese yen overnight, after a recent string of upbeat data fuelled gains in US Treasury yields. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
