Oil prices edged above $71 a barrel Wednesday as the dollar weakened, but gains were tempered by a U.S. crude supply report showing an unexpected rise in inventories last week.
By early afternoon in Europe, benchmark crude for January delivery was up 43 cents to $71.12 in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract added $1.18 to settle at $70.69.
U.S. crude inventories unexpectedly rose last week, the American Petroleum Institute said late Tuesday. Crude stocks rose 920,000 barrels while analysts had expected a drop of 2.0 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
“The market interpreted the API figures as bullish due to the strong distillate draw that was reinforced by plummeting temperatures in the U.S. Northeast, the country’s key heating oil market,” said analysts at JBC Energy in Vienna. “However, it is questionable how bullish it really is when refinery utilization collapses … while global floating storage alone would be (theoretically) sufficient to meet the entire U.S. heating oil demand this winter.”
The Energy Department’s Energy Information Administration plans to announce its own inventory report — the market benchmark — later Wednesday.
“There’s clearly a lot of inventory to chew through,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. “Crude demand is weak right now, but it should slowly improve in 2010.”
Oil prices have fallen from $82 a barrel in October after surging from $32 in December 2008.
Oil prices tend to rise as the dollar weakens, with investors looking to commodities as a hedge against inflation.
On Wednesday, the euro rose to US$1.4575 from $1.4529 in New York late Tuesday. The British pound also gained, climbing to $1.6367 from $1.6256. The dollar retreated to 89.51 Japanese yen from 89.74 yen.
In other Nymex trading in January contracts, heating oil rose 2.37 cents to $1.9270 while gasoline gained 1.55 cents to $1.8606. Natural gas jumped 2.3 cents to $5.546 per 1,000 cubic feet.
In London, Brent crude for January delivery rose 78 cents to $72.83 on the ICE Futures exchange. (AP)
