Oil falls towards $71 ahead of inventory data

Oil prices jumped more than 2 per cent to an eight-month high above $73 a barrel today, as a sudden spike in Brent buying pinned on fund positioning ushered out the market's best quarterly gain since 1990.

Oil falls towards $71 ahead of inventory data

Oil prices fell towards $71 a barrel this afternoon, ahead of US inventory data expected to show a rise in oil product stocks.

Earlier, prices leapt more than $1.50 in under half an hour around 3am as volumes traded on Brent and then US crude oil surged to more than 10 times the norm.

The jump was thought to have been led by a sudden spike in Brent buying pinned on fund positioning.

Both prices and volumes cooled in European trade. US crude for August delivery fell 22 cents at $71.27 a barrel by 2.25pm, off its earlier eight-month high of $73.38.

Brent was down 30 cents to $70.69 a barrel. Christopher Bellew, broker at Bache Commodities said of oil's turnaround: "Speculative buying may be drying up and maybe the prospect of product stock builds in the stats later."

Crude and oil products inventory numbers from the United States will be carefully watched today and tomorrow for the latest indication of demand from the world's biggest fuel consumer.

A Reuters poll of analysts ahead of weekly data forecast US crude stockpiles fell by 1.6 million barrels last week, while gasoline stocks were seen up 2 million barrels and distillate stocks rose 1.5 million barrels.

The American Petroleum Institute will release its weekly US inventory this evening, while the US Energy Information Administration report is due out tomorrow.

Driven by hopes of a global economic recovery, oil prices are on track to post a near 50 per cent increase in the second quarter, the highest quarterly percentage gain since 1990.

Oil has rallied on hopes for an improving economic outlook and a growing appetite for risk among investors, a factor given further impetus by Asian and US stock market gains.

Earlier today, prices surged on unusually high Asian trading volumes, which some traders attributed to big fund players in the market.

Reuters