Oil above US$108 a barrel in Asia Wed(update)

  • Business
  • Wednesday, 06 Apr 2011

SINGAPORE: Oil prices hovered above US$108 a barrel Wednesday in Asia after a U.S. crude supply report showed mixed signals about demand.

Benchmark crude for April delivery was down 21 cents at $108.13 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 13 cents to settle at $108.34 on Tuesday.

In London, Brent crude for April delivery was down 36 cents to $121.53 a barrel on the ICE Futures exchange.

The American Petroleum Institute said late Tuesday that crude inventories fell 2.8 million barrels last week, suggesting stronger demand. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast an increase of 1.3 million barrels.

However, inventories of gasoline rose unexpectedly by 568,000 barrels and crude supplies at the key U.S. storage facility in Cushing, Oklahoma rose 120,000 barrels, the API said.

"The API report was bullish in the big picture sense, with a large unexpected draw in crude oil inventories, but we are not convinced," energy consultant The Schork Group said in a report.

The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.

Traders are also mulling the impact rising global interest rates will have on economic growth and demand for crude. On Tuesday, China hiked interest rates for the fourth time since October in a bid to slow inflation.

"So far China's rate hikes have not collared inflation," The Schork Report said. But oil prices are likely to fall once the rate hike effects are felt, it said.

In other Nymex trading in April contracts, heating oil fell 0.7 cent to $3.18 a gallon and gasoline dropped 1.6 cents to $3.19 a gallon. Natural gas futures were up 0.6 cent at $4.24 per 1,000 cubic feet. - AP

Earlier report

Oil slides as China raises interest rates

NEW YORK: Oil fell Tuesday after China said it will raise interest rates again to help control inflation. Declining gasoline demand in the U.S. and a rare oil shipment from Libya also pulled crude lower later in the day.

Benchmark West Texas Intermediate crude for May delivery gave up 13 cents to settle at $108.34 per barrel on the New York Mercantile Exchange.

In London, Brent crude added $1.23 to settle at $121.89 per barrel on the ICE Futures exchange.

China hiked interest rates for the fourth time since October. Higher interest rates could slow China's economy and shrink its appetite for oil. China trails only the U.S. in oil consumption and should still drive world oil demand this year, though it might not increase consumption as much as previously expected, analysts said. .

"With higher interest rates, it's tougher to raise money," PFGBest analyst Phil Flynn said. "Businesses won't be able to hire as much. People will buy (fewer) cars and they'll drive less."

The Energy Information Administration expects China to account for about 40 percent of increased world demand this year, as it boosts consumption by another 600,000 barrels per day. The U.S. will increase consumption by 130,000 barrels per day, according to the EIA.

U.S. oil and gasoline consumption has fallen as prices rise. MasterCard SpendingPulse said Tuesday that retail gasoline demand slipped for the fifth straight week when compared with the same period last year. SpendingPulse said gasoline purchases fell 3.6 percent to 64.3 million barrels for the week ended April 1. MasterCard analyst Jason Gamel pointed out that demand has been dropping as gasoline prices surged 31.7 cents since the end of February.

Gasoline pump prices rose another 2 cents on Tuesday to a new U.S. average of $3.685 per gallon (97 cents a liter), according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 85.7 cents higher than last year. It now costs more than $4 per gallon in California, Alaska and Hawaii.

Energy traders are still concerned about unrest in North Africa and the Middle East, which supplies about 27 percent of the world's oil. The arrival of an oil tanker in one of Libya's rebel-held ports could mean that oil will start flowing from the country sooner than expected. Before the rebellion, Libya exported about 1.5 million barrels of oil per day - mostly to Europe. Those shipments have all but shut down.

It could be months, even years, before Libya returns to the level of oil shipments it had before the uprising, experts said. Libya supplied less than 2 percent of world demand. Saudi Arabia and other OPEC countries are covering some of the shortage by boosting production. That will put pressure on world supplies, especially if demand increases as expected later this year.

In other Nymex trading for May contracts, heating oil added 1.36 cents to settle at $3.1850 per gallon and gasoline futures gained 3.25 cents to settle at $3.2013 per gallon. Natural gas lost 5.8 cents to settle at $4.231 per 1,000 cubic feet. - AP

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