Crude rises on weak dollar, slide in U.S. gasoline inventory
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SINGAPORE |
(Reuters) - U.S. crude futures rose to their highest in 2-1/2 years on Thursday as the Federal Reserve appeared in no rush to tighten its monetary policy, weakening the dollar, and as gasoline stockpiles fell more than double the forecast.
NYMEX crude for June gained 44 cents to $113.20 a barrel by 0611 GMT, but off an earlier high of $113.70. Brent gained 33 cents to $125.46 a barrel, after settling at $125.13 a barrel.
Chairman Ben Bernanke signaled the central bank was not in a hurry to scale back support for the economy with the labor market still in a "very, very deep hole," resulting in the Nasdaq surging to a 10-year high on Wednesday and gold jumping to a record. The dollar sank to a three-year low against major currencies on Thursday.
"The main factor is that the U.S. monetary policy will remain accommodative for quite a long time," said Ben Westmore, commodities economist at the National Australia Bank. "For the oil market in particular, the decline in gasoline inventories in the U.S. is a positive for prices."
U.S. gasoline inventories fell by 2.51 million barrels to 205.59 million barrels, the Energy Information Administration showed on Wednesday, the lowest level since August 2009 and the lowest level for April since 2007. Analysts had forecast a 1.1
million-barrel draw.
Crude oil stocks surged by more than 6 million barrels last week as imports rose. Domestic crude stocks rose 6.16 million barrels in the week to April 22 to 363.13 million barrels, the report showed, versus expectations for an 800,000-barrel build in a Reuters poll of analysts.
"Improved consumer confidence in April and holiday travel around the Easter holiday may help to explain why the gasoline demand numbers held up," Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said in a report.
Gasoline stocks may decline for "another week or two before the usual pre-summer build-up," due to exports, particularly to Brazil, and maintenance shutdowns in units that produce the fuel, the report said.
DEMAND UNCERTAINTY
Still, oil prices may slide in the next couple of days on expectations that demand in top consumer the United States may weaken because of slower economic growth, analysts said.
In a fresh quarterly forecast, the Fed revised down its growth estimate for 2011 to between 3.1 percent and 3.3 percent from the 3.4 percent to 3.9 percent it saw in January. It said the recovery was proceeding at a "moderate pace," a shift from March, when it said it was on "firmer footing." The government releases its first estimate of first quarter GDP on Thursday.
Growth in U.S. gross domestic product -- a measure of all goods and services produced within U.S. borders -- probably slowed to a 2 percent annual rate or even less, according to a Reuters survey, after a 3.1 percent fourth quarter pace.
"Oil prices may weaken in the next couple of days because U.S. growth is expected to slow, and the Fed has already revised down its growth estimates," Westmore said, adding that U.S. oil futures may trade in the $100-$110 range in the next few days.
U.S. crude prices have risen more than 20 percent so far this year. Lower interest rates tend to fuel commodity prices by driving investors into riskier assets. While the Federal Reserve noted energy and commodity prices were rising, it said their effects would be "transitory".
Factory output in Japan, the world's third-largest oil consumer, fell at a record pace in March but manufacturers expect production to rise in coming months, a sign factories could bounce back earlier than expected as they repair supply chains following the earthquake and tsunami.
MIDDLE EAST UNCERTAINTY
Another factor supporting oil prices is the social unrest in the Middle East.
"There is still a $20-$25 a barrel risk premium on prices because of the Middle East," Westmore said. "Without new information, we are going to prices supported because of this."
The United States took steps to throw a financial lifeline to rebels controlling eastern Libya while forces loyal to Libyan leader Muammar Gaddafi focused their firepower on pockets of resistance in the west.
"The market is now focused on the challenges that lie ahead to bring Libyan production back to pre-crisis levels should the current turmoil subside," Morgan Stanley analysts including Hussein Allidina said in a report. "An organized government is needed quickly to establish a legal governing body to oversee the entire operation."
(Editing by Clarence Fernandez)
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