Oil steady at $103; equities balance high stocks
Brent crude oil steadied around $103 on Wednesday, buoyed by a rally in global stock markets despite an unexpected jump in oil inventories in the United States and a cut in estimates for oil demand growth by the world’s big oil market forecasters.
World equities stabilised on Wednesday although markets remained on edge over the future of central bank support.
A Bank of Japan decision not to follow up a $1.4-trillion stimulus programme announced in April has rekindled fears other central banks, including the U.S. Federal Reserve, could scale back stimulus efforts.
Brent crude oil futures dropped 73 cents to a low of $102.23 per barrel, but then recovered sharply to trade around $103.33 by 1100 GMT, up 37 cents.
U.S. light crude oil rose 10 cents to $95.48.
The International Energy Agency (IEA) said on Wednesday modest economic growth was limiting oil demand worldwide and some developed economies would see absolute declines in oil consumption in 2013.
At the same time, production by the Organization of the Petroleum Exporting Countries (OPEC) was rising, outstripping demand for its oil, with big increases recently in output from Saudi Arabia, Iran and other Middle East Gulf producers.
“The IEA report seems fairly bearish overall,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
“It will do little to end the gloomy picture. OPEC production is rising and running above its target, while demand for its oil is falling… The growth in global oil demand will continue to fall short of the increase in non-OPEC supply.”
The IEA report follows similar assessments this week by OPEC and by the U.S. government’s Energy Information Administration (EIA). Both cut their global oil demand growth forecasts on Tuesday, while signalling ample supplies in most markets.
Oil demand in developing countries in April surpassed that of wealthy nations for the first time ever, the EIA reported.
Ample supplies have led to rising global oil inventories.
U.S. oil stockpiles rose 9 million barrels last week, data from the American Petroleum Institute showed on Tuesday.
“U.S. inventories are still relatively high, well above five-year averages anyway, for this time of year,” said Natalie Rampono, commodity strategist at ANZ.
U.S. oil inventories would normally be expected to start dropping at this time of year, when the summer driving season causes fuel demand to spike.
-Reuters, June 12, 2013