Oil prices steadied today, stabilising after two days of losses under the influence of modest gains in regional equities and dovish comments from the US Federal Reserve.
Japan’s Nikkei average rose 0.8 per cent after US stocks closed mostly lower yesterday following the Fed’s monetary policy statement, suggesting interest rates will remain near zero longer than expected.
US crude for August fell as much as 42 cents to $75.93 a barrel before recovering to $76.45, up 10 cents on the day at 4am. ICE Brent rose 12 cents to $76.39.
US gasoline inventories last week fell by 800,000 barrels, with demand over the past four weeks up 1.2 per cent over the comparable period last year. Distillate stocks rose by 300,000 barrels, while demand jumped 12 per cent.
Yetserday, crude touched $75.17, the lowest since June 15th, up 18 per cent from the May 20th trough below $65, but prices are about $11 lower than their early-May 19-month peak above $87.
“What we see is a market that is still cautious about economic recovery,” said Toby Hassall, an analyst at CWA Global Markets in Sydney. “That feeds into oil demand prospects.”
US crude inventories unexpectedly gained 2 million barrels last week, according to a government report yesterday, while data showed new home sales fell at a record pace in May to their lowest in more than 40 years.
In the US Gulf, BP said it had reinstalled its oil syphon cap at its leaking well off the southern United States. At the same time, the Obama administration appealed a court ruling that blocked its six-month moratorium on deepwater oil drilling.
But a long-term ban on deepwater production may cause the United State longer term problems.
“Obama’s attempts to restrict deepwater drilling are at odds with another policy - to cut dependence on imported oil,” said Jonathan Barratt, managing director of Commodity Broking Services.
“By taking deepwater supplies out of the equation, US self sufficiency in oil could fall to around 30 per cent in 2035 from around 40 per cent if deepwater production is allowed.”
Weather concerns could complicate the picture after the U.S. National Hurrican Center said a tropical wave to the south of Cuba had a 30 per cent chance of becoming a tropical cyclone over the next two days. Storms could hamper cleaning efforts and curb oil production in the Gulf of Mexico.
In other news, the Paris-based International Energy Agency yesterday said crude supplies would be comfortable for five years, further stoking bearish sentiment in the oil market.