(818) 552-4503

World oil prices climb on surprise drop in US crude reserves – Wrap, Lead

LONDON, August 10, 2011 (AFP) – Oil rose on Wednesday as traders digested news of a shock fall in American crude inventories, and after the Federal Reserve vowed to hold near-zero interest rates for the next two years.

But the energy market trimmed some of its earlier gains as traders fretted over the impact of ongoing global economic turmoil which has sent world stock markets plunging once again.

In late afternoon deals, Brent North Sea crude for September rose $2.30 to $104.85 per barrel, having earlier peaked at $107.11.

And New York’s main contract, West Texas Intermediate light, sweet crude for delivery in September, gained $1.92 to $81.22. It had earlier leapt as high as $82.90.

The US government’s Department of Energy announced on Wednesday that American crude inventories tumbled by 5.2 million barrels in the week ending August 5.

That confounded market expectations for an increase of 1.1 million barrels, according to analysts polled by Dow Jones Newswires, and indicated stronger-than-expected demand in the world’s largest energy consuming nation.

Oil also won strong support after the Fed maintained its key interest rate at the record low 0.0-0.25 percent on Tuesday — and indicated it will keep the “exceptionally low” rates “at least through mid-2013.”

“Brent and WTI have made strong gains … after the Federal Reserve’s decision not to raise the federal funds rate at least until mid-2013,” said Commerzbank analyst Carsten Fritsch.

The Fed’s policy committee stopped short of offering a successor to the $600 billion “QE2″ stimulus programme that wound up in June but it said it was reviewing available tools to boost a slowing economy.

The bank also admitted economic growth this year had been “considerably slower” than expected and indicated inflation fears had eased.

Meanwhile, the International Energy Agency cut its estimate for global oil demand this year by 100,000 barrels per day because of a downward revision of demand in the second quarter, high prices and “slowing economic growth.”

But the IEA raised its 2012 forecast by 100,000 barrels per day, anticipating that Japan will increase oil consumption to compensate for the loss of nuclear-generated electricity in the aftermath of the deadly March earthquake.

The IEA’s new forecasts put demand this year at 89.5 million barrels per day, up 1.2 mbd or 1.4 percent from 2010, with 2012 rising to 91.9 mbd, up 1.6 mbd or 1.8 percent from this year.

“Concerns over debt levels in Europe and the US, and signs of slowing economic growth in China and India have spooked the market and raised fears in some quarters of a double-dip recession,” the IEA said in a monthly market report.

“From an oil market standpoint, perceived wisdom is that this must inevitably mean weaker oil demand to come.”

The IEA is the energy monitoring arm of the Organisation for Economic Cooperation and Development, or OECD, which groups 34 of the world’s advanced economies.

About the Author

Related Posts