US crude rises $1/bbl on large inventory fall

10 July 2013 13:05  [Source: ICIS news]

SINGAPORE (ICIS)--US WTI crude futures strengthened on Wednesday, rising by more than $1/bbl, after industry data revealed a much larger-than-expected fall in US crude stocks, but upside was tempered by concerns over weakness in the Chinese economy and lower imports by the world’s second largest oil consumer.

At 11:42 GMT, August NYMEX light sweet crude futures (WTI) were trading at $105.24/bbl, up by $1.71/bbl from the previous close. Earlier, the US benchmark hit a high of $105.33/bbl, up $1.80/bbl.

August Brent crude on London’s ICE futures exchange was trading at $108.32/bbl, up by $0.51/bbl from the previous close. Earlier, the North Sea benchmark rose to a session high of $108.47/bbl, up by $0.66/bbl.

Weekly US inventory data released on Tuesday by the industry body the American Petroleum Institute (API) revealed a much greater-than-forecast drawdown in crude stocks and a contrary-to-forecast drawdown in gasoline inventories. Traders now await the release of official US Government inventory data from the Energy Information Administration (EIA), which is due out later on Wednesday.

WTI strengthened against the Brent in response to the fall in domestic US inventories. The spread between WTI and Brent fell below $3.00/bbl for the first time since December 2010.

The market continued to be supported by supply security concerns generated by ongoing unrest in Egypt, Syria and elsewhere in North Africa and the Middle East.

However, upside pressure on crude prices was tempered by concerns over the Chinese economy following the release of weak June data from the world’s second largest economy and oil consumer.

Official data revealed that China’s exports fell by 3.1% in June from a year earlier. Analysts had expected exports to increase by around 4%. China’s imports also fell by 0.7% in June compared to a year earlier.

China’s imports of crude oil in June were down 7.4% from May at 22.2m tonnes. Total crude imports in China in the first half of 2013 were also 1.4% lower  year on year.

On Tuesday, the International Monetary Fund (IMF) slashed its 2013 global economic growth forecast to 3.10% , down from the 3.30% in April citing weakness in China, the US and Europe. The IMF also cut its 2013 growth forecast for China to 7.75%, down from an earlier forecast of 8% issued the previous month.

By: James Dennis
+65 6780 4327

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