World oil prices rebounded Wednesday after a report showing an unexpected drawdown in US crude inventories reignited concerns about a supply squeeze.
World oil prices rebounded Wednesday after a report showing an unexpected drawdown in US crude inventories reignited concerns about a supply squeeze. New York’s main contract, light sweet crude for delivery in January, rose 82 cents to 57.32 dollars per barrel in closing deals.
In London, the price of Brent North Sea crude for January delivery increased 73 cents to close at 55.05 dollars per barrel. Crude stocks fell by 4.2 million barrels during the week that ended November 25 to total 317.6 million barrels, the US Department of Energy said on Wednesday.
It was well below a drop of 221,000 barrels expected by analysts in New York. Jason Schenker at Wachovia Securities said the report reflected ‘a sizable crude draw … fueled by an increase in utilization,’ suggested demand may be higher than expected, said an AFP report.
Motor gasoline stocks fell 500,000 barrels to 199.9 million barrels, despite predictions of an increase of 1.1 million. Inventories of distillate supplies, which are used to make heating oil and diesel fuel, were much higher than expected – up 3.4 million barrels to 127.9 million. That compared with a forecast of a rise of 613,000 barrels, said the report.
Jamal Qureshi at PFC Energy said there appeared to be a technical snapback in prices after a report that was ‘bearish’ for heating oil. ‘There was a sell-off after that but then it triggered short-covering,’ he said.
Oil prices had been falling since last week, when markets deemed there to be adequate supplies of heating fuel during the northern hemisphere winter. The US National Weather Service has said that demand for heating oil nationwide was expected to be about 20 percent below normal this week owing to warmer temperatures.
The US northeast accounts for 80 percent of US demand for heating fuel. ‘Warmer-than-expected temperatures will reduce energy demand in key consuming regions of North America, allowing US oil inventories to increase,’ said Bart Melek, economist at BMO Nesbitt Burns. Since hitting a record high point of 70.85 dollars per barrel in New York on August 30, oil prices have fallen strongly to reflect unusually mild weather during October and much of November, said the report.
However analysts at the Sucden brokerage firm in London cautioned: ‘We are still too early into winter to lose the risk premium as we may still see a prolonged cold snap putting pressure on stocks.’
Source : www.tradearabia.com