Oil rose towards $60 a barrel on Wednesday, after hitting a six-month high the previous day, after United States inventory data showed an unexpected drawdown, boosting hopes for recovery in the world’s top energy user.
Oil was also buoyed by a weaker US dollar, which slid to a four-month low against a basket of currencies as growing optimism about the global economy boosted investors’ risk appetite and curbed demand for the greenback as a safe haven.
The market awaited the US Energy Information Administration’s (EIA) weekly report at 14:30GMT to confirm the report of a surprise fall in crude stocks.
April retail sales data and March business inventory figures due later in the day would also provide more clues on the health of the US economy.
By 07:45GMT, US crude for June delivery was up 75 cents at $59,60 a barrel, having hit a high of $59,90. It settled 35 cents higher at $58,85 a barrel on Tuesday, off an earlier peak of $60,08, its highest since November.
London Brent crude rose 80 cents to $58,74.
The American Petroleum Institute (API) said on Tuesday that US crude inventories fell 3,1-million barrels to 370,7-million barrels last week, against a forecast of a 1,4-million barrel increase in a Reuters poll of analysts.
“The unexpected draw in crude oil stocks in the APIs last night is clearly behind this move,” said Christopher Bellew, oil broker at Bache Commodities in London.
“Although crude stocks are high, there is an incentive to hold stocks with low interest rates and big contangos [discounts for prompt oil]. So it looks as if oil has achieved some sort of equilibrium even though the recession is still with us.”
Adding to positive sentiment was data that showed Chinese refinery output had accelerated in April, registering a second yearly rise in six months, as refiners stepped up supplies amid a recent big fall in inventories.
Coupled with the second-highest ever daily crude imports last month, signs point to a strong rebound in fuel demand for the world’s second-biggest oil consumer.
The market shrugged off data showing China’s industrial output rose less than expected last month. China’s factory output rose 7,3% in April from a year earlier, below analysts’ 8,3% forecast.
Another bright spot may come with the release of US April retail sales at 12:30GMT, expected to remain unchanged from a 1,2% fall in March, a Reuters poll of economists showed. Excluding automobiles, sales are seen up 0,2% compared with a 0,9% slide the prior month.
Oil has plunged from a record high above $147 a barrel hit last July, but a rally in stock markets over the last few months has helped lift crude almost 80% from a January low of $32,70 a barrel.
The Organisation of Petroleum Exporting Countries (Opec) is unlikely to cut its oil output target at its meeting later this month, a source close to the group’s president and a second Opec delegate said on Tuesday.
The producer group is also due to release its monthly report later on Wednesday.—Reuters