Crude strengthens on unexpected US inventory drop, weaker dollar

08 February 2012 12:22  [Source: ICIS news]

SINGAPORE (ICIS)--Crude strengthened on Wednesday, with March NYMEX light sweet crude futures (WTI) futures rising more than $1/bbl – at one stage with prices buoyed by an unexpected large drawdown in US crude stocks, a softer US dollar and hopes that Greece will soon reach an agreement with creditors following extended negotiations.

At 11:34 GMT, March WTI was trading at $99.47/bbl – up $1.06/bbl on Tuesday’s close. Earlier, the US benchmark rose to a session high of $99.65/bbl, up by $1.24/bbl from the previous close.

March Brent crude on London’s ICE Futures exchange was trading at $116.80/bbl on Wednesday, up 57 cents/bbl from the previous close. Earlier, the North Sea benchmark rose to a session high of $116.87/bbl, up by 64 cents/bbl from Tuesday’s close.

Crude continued to trade close to recent highs. On Tuesday, ICE Brent futures settled at their highest level since 2 August 2011. Prices remained supported by concerns over Iranian supplies and by tensions over the upcoming embargo on Iranian oil imports that comes into effect on 1 July. The cold weather in Europe has added further support.

US inventory data released on Tuesday by the American Petroleum Institute (API) revealed an unexpected 4.5m bbl fall in US crude stocks. Analysts had forecast a large build in US crude inventories as a result of refinery turnarounds in February and March.

Traders now await the more widely followed US government inventory data from the Energy Information Administration (EIA), which should be released later on Wednesday.

The US dollar weakened against the euro and other leading currencies, which made dollar-priced crude more attractive to international investors.

On Tuesday, Greek Prime Minister Lucas Papademos reached an initial agreement with the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF) on an austerity programme, which is required in order for Greece to secure a new bailout package from the three organisations. The Greek leader was set to meet government coalition parties to finalise the agreement on Wednesday.

Officials from the International Institute of Finance (IIF), the global association for financial institutions that is negotiating on behalf of private creditors, returned to Paris on Tuesday night for further negotiations, describing their talks with Greece as constructive.

($1 = €0.76)

Read Paul Hodges’ Chemicals and the Economy blog
For more on pricing intelligence visit ICIS pricing

By: James Dennis
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