Oil futures: Crude pushes higher despite dimming demand view

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Oil futures traded higher Tuesday as traders focused on expectations for a drop in U.S. crude inventories and shrugged off recent forecasts of weaker oil demand.

Light, sweet crude for October delivery rose $1.07, or 1.2%, to $89.26 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange traded down 9 cents, or 0.1%, to $112.16 a barrel.

Nymex crude, the U.S. benchmark, pushed higher ahead of a government survey on U.S. oil inventories due Wednesday. The survey is expected to show crude stockpiles fell 3.3 million barrels last week, according to a poll by Dow Jones Newswires.

Futures also rose as traders took profits off the record-high spread between Brent and Nymex crudes, market participants said. The gap between the two benchmarks neared $27 a barrel last week, but has sold off in recent days.

"We still have a technically inspired rally," said Gene McGillian, broker and analyst at Tradition Energy in Stamford, Conn. "Yesterday, we saw unwinding on Brent (WTI) spreads and we're continuing to see that today."

Crude rallied despite the International Energy Agency's cut in its forecast for oil demand for 2011 and 2012. The energy watchdog said Tuesday that the demand cut reflects the weakening global economy, adding that the oil market could be pushed into a small surplus next year if economic conditions weaken enough.

The IEA cut its oil-demand estimate by 200,000 barrels a day for 2011 and 400,000 barrels a day by 2012.

However, the Paris-based agency said a key challenge for the oil market remains the resumption of Libyan oil exports, adding that the "road back to full operational recovery is likely to be a long and difficult one" in the North African country.

Libya previously exported about 1.3 million barrels a day of high-quality crude, largely to Europe. The removal of Libyan exports is a key factor behind the sharp rally in Brent crude prices in recent months.

It's also weighed on Nymex crude, but the bottleneck at the Nymex delivery point Cushing, Okla., has kept the price of the U.S. contract under pressure for much of this year.

The IEA's monthly report echoes views expressed by the Organization of Petroleum Exporting Countries, which took a bearish view on the global recovery in a report Monday. However, OPEC hinted some of its members could cut production to manage the risk of falling oil prices.

"We feel that both crude benchmarks will have difficulty maintaining this week's independent show of strength amidst broad based macroeconomic trends that are still tilting heavily in a bearish direction," said Jim Ritterbusch, head of the oil-trading advisory firm Ritterbusch and Associates.

Front-month October reformulated gasoline blendstock, or RBOB, recently traded up 0.15 cent, or 0.1%, to $2.7397 a gallon. October heating oil traded down 0.93 cent, or 0.3%, to $2.9382 a gallon.

--Christian Berthelsen contributed to this article.



Comments (0) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left


6D Series

John Deere offers four models in its economical 6D Series Tractor lineup: the 105 horsepower 6105D, 115 horsepower 6115D; 130 ... Read More

View all Products in this segment

View All Buyers Guides

)
Feedback Form
Leads to Insight