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Oil jumps to around $75 on equities, US data

business Updated: Jul 08, 2010 16:53 IST

Oil rose to around $75 per barrel on Thursday, supported by a rally in stock markets and an industry report showing a sharp fall in crude oil inventories in the United States, the world's biggest oil consumer.

The euro surged to a two-month high and Asian stocks climbed to their highest in more than a week on Thursday after a bullish forecast from State Street fuelled optimism about the coming US earnings season and underpinned growing tolerance for risk, sending Wall Street higher.

US crude oil futures for August rose as much as $1.03 to $75.10 a barrel, the highest intraday price since July 1, and were up 75 cents at $74.82 by 0955 GMT. ICE Brent crude for August rose 75 cents to $74.26.

Oil prices are still more than $12 below their 19-month peak above $87 reached in early May, although they have rebounded sharply from a trough below $65 on May 20.

"Commodities prices have made gains on a broad front thanks to friendlier equity markets," said Eugen Weinberg, commodity analyst at Commerzbank in Frankfurt. "The API inventory data released yesterday evening gave additional support to prices."

"It will be interesting to see if the US government figures confirm the API figures when they come out later today."

The American Petroleum Institute (API) said in a report late on Wednesday that US crude oil inventories tumbled 7.3 million barrels last week, more than three times the expected drop.

Storm warning

Government statistics on US oil inventories and demand from the Energy Information Administration (EIA) follow the API data on Thursday at 1500 GMT.

Expectations are for crude stockpiles to have dropped 2.3 million barrels, according to a Reuters survey.

Stockpiles fell after Hurricane Alex forced some producers in the US Gulf to curb production and Mexico to close loading terminals that send most of their output to US refiners.

A tropical depression has formed over the northwestern Gulf of Mexico and is heading towards the Texas-Mexico border, a region still recovering from Alex, the US National Hurricane Center said.

A tropical storm warning was issued in the lower Rio Grande valley along the border, from south of Baffin Bay, Texas to Rio San Fernando, Mexico. The warning signalled the storm could make landfall within the next 24 hours. The expected course takes the weather system away from main oil-producing regions of the Gulf.

Gasoline stocks fell 191,000 barrels, the API said, in line with analysts' projections, while distillates including heating oil and diesel fell 1 million barrels, contrary to a forecast for a 1.4 million-barrel gain.

Other data was also supportive.

The International Monetary Fund raised its 2010 global growth forecast on Thursday, citing an expansion in Asia and in US private demand. The IMF upgraded its 2010 global output growth forecast to 4.6 per cent from 4.2 per cent after a fall of 0.6 per cent in 2009.

The IMF said a double-dip recession was unlikely.

On Wednesday, the EIA raised its 2010 world oil demand growth forecast by 60,000 barrels per day (bpd) from its previous estimate. The EIA now expects oil demand to climb by 1.56 million bpd in 2010 to 85.82 million bpd.

Nearly all the growth in world oil consumption this year will come from outside the major industrialised countries, led by China, Saudi Arabia and Brazil, it said.

"The EIA has, without drawing attention to it, increased its estimate for 2009 demand by 250,000 bpd," said Philip Wiper, director of oil brokers PVM in London in a note to clients. "This is good news for OPEC."