Crude retreated Wednesday from a short-lived surge to US$75 a barrel late on Tuesday, after US stockpiles unexpectedly rose. US government data released yesterday showed crude inventories edging up by 200,000 barrels to 343.8 million barrels for the week ending last Friday, confounding analysts' predictions of a further decline after a drop of 8.4 million barrels the week before.
In New York yesterday, crude fell nearly 6 per cent in early trading, dipping as low as $70.67. Oil prices followed equity markets lower as traders locked in profits from the previous session and digested the latest government figures. But while it was not what investors were expecting, last week's slight increase in US crude stocks may simply reflect a redistribution of oil inventories between storage facilities, rather than any drop in demand for crude.
US imports at 9.2 million barrels per day (bpd) were 1.1 million bpd higher than in the previous week, the government reported. "People are holding stocks offshore, and sooner or later these would show in crude stocks in the US," Tony Nunan, a risk manager at Mitsubishi, told Reuters. Oil inventories stored at sea in tankers had declined but remained at very high levels, providing OPEC with little incentive to raise its output target at the group's September 9 meeting, the Venezuelan oil minister, Rafael Ramirez, said yesterday.
"We need for them to come down to the average levels," Mr Ramirez said. In a more bullish development for the oil market, US petrol stocks fell by 1.7 million barrels, suggesting Americans may be driving more than they were earlier in the summer. But analysts said crude was already at a level most people were not expecting until the end of the year. "The economic data is important, but a lot of the positive economic figures had been built into the prices," Mr Nunan said.
Analysts are now weighing whether oil demand in China will be strong enough to reverse crude's latest setback, after Wen Jiabao, the Chinese premier, warned that the world's second-biggest energy consumer was facing new economic difficulties. Tuesday's rally took crude to its highest level this year, after it tumbled from a record $147 a barrel last July to below $35 in December. @Email:tcarlisle@thenational.ae