US crude peaks above $135/bbl on inventory fall

22 May 2008 06:39  [Source: ICIS news]

SINGAPORE (ICIS news)--Crude futures gained well in excess of $1/bbl on Thursday with July NYMEX light sweet crude futures peaking above $135/bbl after an unexpected large decline in US crude stocks and on a weakening dollar.

At 5:08 GMT on Thursday, July NYMEX light sweet crude futures were traded at $134.67/bbl, up $1.50/bbl on the previous close, after earlier hitting a high of $135.04/bbl, up $1.87/bbl.

At the same time, July ICE Brent futures were traded at $134.32/bbl, up $1.62/bbl on Wednesday’s settlement price. Earlier the contract had hit a new record high of $134.50/bbl, up $1.80/bbl.

Prices surged after US weekly supply data from the Energy Information Administration (EIA), released on Wednesday, revealed an unexpected decline in crude stocks of some 5.4m bbls. Analysts had forecast a build of around 600,000 bbls.

US gasoline inventories also showed a surprise fall of some 800,000 bbls, against a forecast gain of 700,000 bbls, which prompted a run up in gasoline futures to new record levels. Distillate stocks rose by just 700,000 bbls against an expected increase of 1.3m bbls.

The US dollar weakened on Thursday to a one month low against the euro after the Federal Reserve cut its forecast for US economic growth to 0.3-1.2% in 2008, against a previous forecast of 1.3-2% earlier in the year.

Weakness in the US dollar has served to attract fund money into the energy and commodity markets as a hedge against inflation.

However, US Energy Secretary Sam Bodman said on Wednesday that record high oil prices accurately reflected tight supplies and strong global demand and mentioned that speculators were not responsible for the price rise.

His views were in sharp contrast to those expressed earlier in the week by senior OPEC officials who blamed the record high prices on speculation, a weak dollar and geopolitical problems. OPEC believes oil markets to be well supplied and continues to resist calls to increase output.

($1 = €0.63)

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By: James Dennis
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