THE price of oil rose above US$85 a barrel yesterday, buoyed by a broad rise in global financial markets and a report showing US crude supplies fell more than expected last week, suggesting demand may be improving.
By early afternoon in Europe, benchmark oil for July delivery was up US$1.13 to US$85.42 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 31 cents to settle at US$84.29 in New York on Tuesday.
In London, Brent crude for July delivery was up US$1.41 at US$100.25 per barrel on the ICE Futures exchange.
"A slight brightening of sentiment on the financial markets and a weaker US dollar are putting wind in the sails of oil prices," said analysts at Commerzbank in Frankfurt. The fall in the dollar makes crude cheaper for traders using other currencies.
Prices were also buoyed since late Tuesday, when the American Petroleum Institute said that crude inventories fell 1.8 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 1 million barrels. Inventories of gasoline rose 1.4 million barrels last week while distillates increased 1.8 million barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data - the market benchmark - later yesterday.
Crude has sunk from US$106 last month amid signs of weakening economic growth and oil demand in Europe, the US and China. A dismal US jobs report last week has investors worried the world's biggest economy is faltering just as Europe's debt crisis threatens to send the continent into recession.
J.P. Morgan recently cut its US economic growth forecast for the 2012 to 2.2 percent and expects crude demand to be flat the rest of the year from a year earlier.
"With the US economic forecast now moving lower, flags are being raised not only in Europe and Asia, but also in the US," J.P. Morgan said in a report.
Traders will closely watch a European Central Bank policy meeting later yesterday and congressional testimony from US Federal Reserve Chairman Ben Bernanke on Thursday.
Oil prices were also boosted by the weaker dollar. On yesterday, increased risk appetite among investors helped the euro rise to US$1.2506 from US$1.2446 late Tuesday in New York.
In other energy trading, heating oil was up 3.46 cents at US$2.6682 per gallon and gasoline futures gained 2.47 cents to US$2.7094 per gallon. Natural gas fell 2.2 cents to US$2.424 per 1,000 cubic feet.
Source:shanghaidaily.com