Oil prices rise on strong U.S. demand
Brent crude oil rose on Wednesday as strong demand and falling stockpiles in the United States pushed prices higher.
Brent futures were up 99 cents at $64.69 a barrel at 0514 ET. Front month U.S. crude futures were up 83 cents at $60.80 per barrel.
U.S. crude stocks fell last week even as refineries cut output, while gasoline inventories dropped and distillate stocks built, data from industry group the American Petroleum Institute showed on Tuesday. [API/S]
U.S. crude stocks are forecast to have fallen 1.7 million barrels last week, according to a Reuters poll of analysts. Gasoline stocks are expected to be down 300,000 barrels. [EIA/S]
"The API (data) was bullish and (U.S. gasoline) is tight," a broker in London said.
J.P. Morgan said in its weekly oil research note that U.S. production had reached a new high this week, but that it would start to drop.
An expected fall in U.S. crude production due to the relatively high cost of producing shale has also been supportive of prices.
However despite the strength of demand in the United States and Asia, prices have mostly stayed below $65 per barrel this year. This time last year Brent crude surpassed $115 per barrel.
An excess supply of oil in the Atlantic basin has seen oil traders leave full tankers floating on the sea, in some instances for months.
"There are so many tankers floating for prompt delivery that people will want to see the fall in shale production, rather than predictions of a decline before it will give much support," said Maarten van Mourik, an independent oil economist in Paris.
Investors will closely watch stock data for clues on whether strong U.S. demand will do enough to alleviate the surplus.
U.S. Energy Information Administration (EIA) data published this month shows that global petroleum oversupply has more than doubled to a record 2.6 million barrels per day (bpd) since the end of the second quarter of last year, when one of history's biggest oil price routs started.
Despite this, some analysts say they expect prices to rise somewhat going into the second half of the year as demand is strong and stocks are seen falling.
"Fundamentals are at an inflection point and will improve from here with high refinery runs this summer and sequentially declining U.S. crude production. As crude stocks erode, prices will gradually strengthen," said U.S.-based Pira Energy.
Strong U.S. fuel demand, this week's tropical storm, recent Canadian wildfires that led to the closure of oil production as well as ongoing stock withdrawals have resulted in U.S. prices outperforming international Brent contracts, pulling down Brent's premium to January lows of around $3 per barrel.