Oil crept above $65 a barrel today, on track for its largest monthly percentage gain in more than a decade, after government data showed a surprisingly sharp drop in US crude inventories and OPEC left output steady.
Oil prices have jumped 27 per cent this month, buoyed by hopes of a global economic recovery later this year and a bullish price outlook from OPEC kingpin Saudi Arabia.
US crude oil for July delivery edged up 18 cents to $65.26 a barrel by 7.07am. The contract, which has risen about 5 per cent this week, settled up 2.6 per cent at $65.08 yesterday, a new six-month high.
London Brent crude gained 20 cents to $64.59.
“The market seems to be focusing strongly on the bullish sentiment and the brighter macroeconomic outlook, but it's a little doubtful whether the demand fundamentals can continue to support oil prices at such levels,” said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
Japanese industrial production rose 5.2 per cent in April on a monthly basis, and the government expected continued gains through June.
Better US durable goods orders out yesterday also reinforced the sense that the global economic slump might be abating, despite a disappointing US home sales report and lingering concerns over mounting Western government debt.
Another bright spot was US crude stocks, which fell by 5.4 million barrels in the week to May 22nd, the US Energy Administration said, way above analysts' expectations in a Reuters poll for a 700,000 barrel decline, as refiners ramped up output ahead of the summer driving season.
Gasoline inventories also dropped for the fifth week in a row as demand rose in the week preceding the Memorial Day holiday, which traditionally marks the start of the summer driving season in the US.
OPEC's decision to hold production steady helped prop up prices.
The producer group yesterday kept its output targets unchanged as the market had expected, betting on a strengthening world economy and tentative signs of increased demand.
Reuters