Brent crude futures hovered below $113 a barrel as concern about weak gasoline demand ahead of the U.S. driving season and a rebounding U.S. dollar weighed on prices.
|||Brent crude futures hovered below $113 a barrel on Wednesday as concern about weak gasoline demand ahead of the U.S. driving season and a rebounding U.S. dollar weighed on prices.
Crude oil inventories fell less than expected, renewing fears high prices are cutting into U.S. gasoline consumption, where the start of the driving season will be officially marked by Memorial Day this weekend.
The American Petroleum Institute (API) said crude inventories fell 860,000 barrels for the week ended May 20, lagging expectations of a 1.3 million-barrel draw.
Gasoline stocks also hinted at weakening demand, rising 2.4 million barrels, after analysts had forecast a 300,000-barrel build.
“The API stats yesterday appear to show weakness in gasoline demand and it seems the support from gasoline could disappear reflecting the impact of high demand on prices,” said Christophe Barret, oil analyst at Credit Agricole Corporate and Investment Bank.
Falling consumption would prompt a correction in oil prices and forecasts Brent will drop to $85 a barrel by the second half of the year, he said.
Brent crude for July was up 22 cents a barrel at $112.75 a barrel at 11:31 SA time, up from as low as $111.14 a barrel earlier in the session. U.S. crude was down 8 cents a barrel at $99.51 a barrel, up from a low of $98.26.
The recovery in oil prices accompanied a jump in the euro, which briefly rose on Wednesday after Finland's parliament approved Portugal's bailout package, quelling some concerns about the euro zone debt crisis.
Data from the U.S. Energy Information Administration (EIA) is due at 16:30 SA time and has supported markets of late, showing 11 successive weekly motor fuel draws.
RESISTANCE
Bullish comments from the oil trading community have not so far this week shielded the market from pressure exerted by a stronger dollar and signs of demand weakness.
“Despite all the TVs and the financial websites running the large 'Goldman sees oil at 130 $/bbl' banner the whole day, WTI did not manage to break the resistance of 100 $/bbl,” said Oliver Jakob, an analyst at Petromatrix, in a note.
“We are convinced that we will see Goldman Sachs trading at 130 before we see Brent trading at 130 $/bbl,” he added.
That said, on Wednesday Glencore International Chief Executive Ivan Glasenberg joined the chorus saying commodities fundamentals remain strong as buoyant demand from emerging markets strains tightening supplies.
The comments followed Goldman Sachs' report on Tuesday, which said the market was “structurally bullish” as fuel demand growth was set to sap global inventories and strain OPEC's spare oil output capacity.
South African President Jacob Zuma plans to visit Tripoli next week to discuss an exit strategy for Libyan leader Muammar Gaddafi in cooperation with the Turkish government.
Intensifying NATO airstrikes on Tripoli have helped keep a floor on oil prices.
US regulators launched one of the biggest ever crackdowns on oil price manipulation on Tuesday, suing two well-known traders and two trading firms owned by Norwegian billionaire John Fredriksen for allegedly making $50 million by squeezing markets in 2008. - Reuters
Source: http://www.iol.co.za/brent-hovers-beneath-113-1.1073892
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