Oil rebounds ahead of EIA inventory data - Sharp drop in US crude stocks

Oil rebounds ahead of EIA inventory data - Sharp drop in US crude stocks
By Miles Johnson
Copyright The Financial Times Limited 2009
Published: July 1 2009 11:08 | Last updated: July 1 2009 11:08
http://www.ft.com/cms/s/0/20f131aa-6626-11de-a034-00144feabdc0.html


Oil rebounded on Wednesday, edging back above $71 a barrel, as weekly industry figures showed a sharp drop in US crude stocks and data showing further improvement in the Chinese manufacturing sector underpinned confidence in a global economic recovery.

Data from the American Petroleum Institute, widely followed as an indicator of the direction of wider ranging official data released later in the day, showed crude stocks fell by 6.8m barrels compared to forecasts of just a 2m barrel drop for the week.

While the official inventories data from the Energy Information Administration, the statistical arm of the US Department of Energy, is the main attraction, the increasing similarities between the EIA and API data over recent weeks has boosted the latter’s market moving significance.

After the API release Nymex August West Texas Intermediate crude reversed its losses from the previous session to gain $1.25 to $71.14. ICE August Brent crude rose $1.28 to $70.58.

In spite of predictions for a quiet trading week ahead of US employment data on Thursday and the US Independence Day holiday on Friday, crude prices thrashed around wildly – breaking through $73 a barrel before falling back to $69 after the release of disappointing US consumer confidence data.

“Beyond any help arising from equities, FX and an expanding money supply, crude oil market fundamentals look fragile,” said Francisco Blanch of Bank of America-Merrill Lynch.

“No doubt, a rally in equities or a weaker US dollar could support higher oil prices. But anyway you cut it, oil demand is still extremely weak and total OECD petroleum stocks are at very high levels. Perhaps more importantly, our latest estimates suggest that OPEC crude production is already on the rise. In sum, we believe oil prices will struggle to push higher over the next three months, and we even see some near-term downside to WTI crude oil prices.”

Elsewhere, copper prices were boosted by Chinese purchasing manager’s index showing the manufacturing sector in China, the world’s largest consumer of copper, expanded for the fourth consecutive month.

Copper gained 2 per cent to $5070 a tonne, while aluminium gained 0.7 per cent to $1640 a tonne.