Oil above $60 as global equities rally
US crude rose by 91 cents to $60.60 a barrel by 1256 GMT, while London Brent crude rose 75 cents to $61.44. On Monday, US crude dropped to a session low of $58.32, its weakest since mid-May, but began to recover in late trade and settled only 20 cents below Friday’s close. Last week prices fell by nearly 11 per cent in the largest weekly fall since January.
“People are looking at the bigger picture for direction on oil prices. It looked like we were heading south, but it is getting a lift off of yesterday’s US rally and people are looking out for the earnings,” said Rob Montefusco at Sucden Financial.
Rebounding equity markets, which are anticipating upcoming earnings will provide signs of economic recovery, helped to spur oil higher. World stocks as measured by the MSCI rose by one per cent to 239.24 points yesterday, following on from a more than two per cent rally on Wall Street on Monday.
A speech by US Treasury Secretary Timothy Geithner, pointing to growing confidence in the banking sector, helped to shore up confidence. But for oil, weak fundamentals could limit gains.
In its latest monthly report yesterday, the Organisation of the Petroleum Exporting Countries said world demand for its oil would fall by 380,000 barrels per day to 28.11 million in 2010 compared with this year. For the nearer term, the market will look to US inventory data for release yesterday and today. Late yesterday industry body the American Petroleum Institute will release its figures, following by the US Government’s Energy Information Administration today.
Analysts polled by Reuters predicted crude stocks would have fallen for a sixth straight week, but distillate inventories – which include diesel – are already at a nearly 25 year high – were expected to rise again. Petrol stocks were also expected to rise higher.
Some analysts identified the widening offensive by Nigeria’s main militant group against Africa’s main oil producer as a bullish factor, that could limit supplies. The Movement for the Emancipation of the Niger Delta sabotaged an oil dock in Lagos state, killing five people in the group’s first attack outside the Niger Delta since it began its latest campaign.
“We thought this [attack] rather important, for any time a rebel organisation extends its geography it is a sign that the government is losing control and the rebels are gaining,” said Dennis Gartman in his daily trading note.
Gulf crude declines
Crude oil from Qatar, the Organisation of Petroleum Exporting Countries second-smallest producer, fell as low fuel demand limited buying from refiners in Japan and South Korea.
Qatar Marine for September dropped four cents to a discount of two cents a barrel to its official selling price, according to data compiled by Bloomberg. The country’s Land grade fell six cents to a discount of three cents a barrel to its official price, Bloomberg data showed.
Qatar sold 68 per cent of its crude oil to Japan in 2008, the largest amount, according to the latest Opec Statistical Bulletin. Nippon Oil and Idemitsu Kosan, the country’s two biggest refiners, have said they would cut their processing runs in July because of declining consumption.
Demand for the grades also slipped as Qatar Petroleum, the country’s state-owned producer, increased the June official prices for Qatar Land to $71.10 a barrel, the highest in nine months, and Marine to $70.10 a barrel.
Oman for immediate loading increased $1.12, or 1.8 per cent, to $62.73 a barrel. Dubai oil for loading in September rose $1.22, or two per cent, to $62.27 a barrel.
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