Oil prices continue to lift in sign of recovery | Shanghai Daily

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October 8, 2009

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Oil prices continue to lift in sign of recovery

OIL prices rose for the third straight day yesterday, edging above US$71 a barrel after an industry report showed a reduction in United States crude inventories, boosting the view demand is recovering.

US crude for November delivery rose 26 US cents to US$71.14 a barrel yesterday, adding to Tuesday's gains of 47 US cents.

London Brent crude rose 32 US cents to US$68.88.

The oil gains followed a report by the American Petroleum Institute saying crude stocks fell 254,000 barrels in the week to October 2, defying forecasts in a Reuters poll of analysts for a 2.2-million-barrel increase.

Distillate stocks -- including diesel and heating oil -- fell 2.9 million barrels, countering expectations for a 300,000-barrel build, while gasoline stocks rose 544,000 barrels, against estimates for a 1-million-barrel increase.

The API report is seen as a precursor to the more authoritative data issued by the US Energy Information Administration, which will be released early today (Beijing time).

The EIA also raised its global oil demand estimate by 170,000 barrels a day for the fourth quarter.

It expected consumption to rise by 1.1 million barrels a day next year, against earlier expectations of a rise of 910,000 barrels a day.

The second day of gains for Asian and European shares, on growing confidence of a global economic recovery, gave oil prices an extra lift.

Oil has rebounded from an 11-week low of about US$66 in late September back above the US$70 level, but some analysts caution it could slip back in the near term.

"Oil looks like it's on shaky ground as we approach the US third-quarter (corporate) reporting season," said Mark Pervan, a commodities analyst at the Australia & New Zealand Bank.

"A lot of near-term price gains have been won off a rebounding equity market.

"I suspect the third-quarter reporting card will struggle to match the impressive second-quarter results, which were mainly driven by one-off aggressive cost cutting."

After having jumped by about 40 percent in the second quarter, oil prices have squeezed out a gain of only 1 percent in the last quarter, trading in a band of between US$65-US$75.

While the global economy is healing from the financial crisis, the recovery, along with energy demand, remains fragile.

A US Federal Reserve official said on Tuesday that while the world's largest economy was clearly rebounding, it was too soon to begin to withdraw the Fed's massive support.

Weakness in the US dollar is also supporting commodities priced in the greenback as they become cheaper for holders of other currencies.

Gold has risen to a series of record highs over the past two days, touching US$1,048.20 an ounce yesterday.



 

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