Oil rises above $70 on bullish API report

(BARREL, REPORT, CRUDE, RECOVERY, MILLION, ECONOMIC)

By Fayen Wong
PERTH (Reuters) - Oil climbed back above $70 a barrel on Wednesday as an industry inventory report showing a larger-than-expected fall in U.S. crude stocks buoyed hopes of a demand recovery and encouraged buying.
The American Petroleum Institute said that domestic crude stocks fell 6.8 million barrels to 349.7 million barrels last week, against analysts forecast for a much smaller drawdown of just 2 million barrels.
This helped turn crude around from a 2 percent overnight loss, after a drop in U.S. consumer confidence added to concerns about a potential economic rebound.
U.S. crude for August delivery rose 59 cents to $70.48 a barrel by 0636 GMT (2:36 a.m. EDT). The contract settled down $1.60 at $69.89 a barrel on Tuesday, after earlier rising to an eight-month high of $73.38.
London Brent crude rose 62 cents to $69.92 a barrel.
"The U.S. consumer confidence report was a negative for the oil price but in late news, reports by the American Petroleum Institute that crude stocks fell by 6.8 million barrels helped to lift sentiment," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
The API report is regarded as a precursor to more authoritative numbers issued by the U.S. Energy Information Administration at 10:30 a.m. EDT on Wednesday.
Data from South Korea and from China, the world`s No.2 energy consumer, also offered some encouragement.
China`s official purchasing managers` index (PMI) for June rose to 53.2 from 53.1 in May, showing that the country`s economic recovery is on more solid ground, while South Korea`s export numbers were much better than forecast.
Oil prices, which have tumbled from a record high of over $147 struck in July last year, have rallied in recent months on a weak dollar and hopes of a global economic recovery to chalk up a 42 percent gain in the last quarter -- the highest quarterly gain since 1990.
But some analysts have questioned the sustainability of the current prices as near term demand remains weak and the global economic outlook was still murky, a view backed up by Japanese business sentiment that improved less than expected in June.
U.S. unemployment and housing data, due later on Wednesday, will give the next clues on how the world`s economies are faring.
(Reporting by Fayen Wong; Editing by Michael Urquhart)
Original article

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Oil spikes to 8-month high on brief Brent bid frenzy

(PRICES, BARREL, BRENT, MARKET, TRADERS, ASIAN)

By Fayen Wong
PERTH (Reuters) - Oil prices jumped more than 2 percent to an eight-month high above $73 a barrel on Tuesday, as a sudden spike in Brent buying pinned on fund positioning ushered out the market`s best quarterly gain since 1990.
While the rally drew support from fresh attacks on oil facilities in Nigeria as well as improving risk sentiment aided by rising equity markets, traders said those factors were secondary to the sudden big Brent bid orders that triggered the frenzy, overwhelming liquidity during the thin Asian day.
Trading volume in both Brent and U.S. crude oil futures surged to more than 10 times the norm for the Asian time zone as prices leapt more than $1.50 in under half an hour around 0200 GMT (10 p.m. EDT), the sort of move typically only seen in the event of hurricanes or other major disruptions.
"It feels like short-covering because of stop orders left overnight," said a trader with a global investment bank.
Both prices and volumes cooled slightly by midday, with U.S. crude for August delivery up $1.29 at $72.78 a barrel by 0405 GMT, off its earlier eight-month high of $73.38. August trade was 12,400 lots versus a few thousand lots normally.
The main focus was on London ICE Brent crude, with volume in the front-month August contract surging to more than 17,000 lots versus the less than 1,000 lots normally, and prices spiking to a peak of $73.50 a barrel. Traders said bids for 500 or 600 lot clips spooked a market accustomed to 10-20 lot bids.
By 0407 GMT, Brent was up $1.66 to $72.65 a barrel.
Trading activity in U.S. gasoline and heating oil, which expire at the end of the day, was minimal.
Most traders were quick to point the finger at one or several big funds, either closing out loss-making positions, dressing up returns by boosting prices at the end of the quarter or perhaps taking a position in anticipation of a Q3 influx of new funds.
"This could be end of quarter movement, and traders are trying to push prices higher and then selling before closing their books," said Mark Pervan, senior commodities analyst at ANZ Bank. "I haven`t seen any new catalyst on the news front."
Others were more blunt about the unexplained surge in volume, which seemed to be counter-productive given the fact that any sizeable bid would drive up prices due to thin Asian liquidity.
"The only reason to do that size at that time of day is to try to move the market or because you are an idiot," said one.
Some analysts pointed to Nigeria, where the main militant group said on Monday its fighters had attacked an oil facility belonging to Royal Dutch Shell (RDSa.L) days after President Umaru Yar`Adua proposed an amnesty.
Driven by hopes of a global economic recovery, oil prices are on track to post a near 50 percent jump in the second quarter, the highest quarterly percentage gain since 1990.
Oil has rallied on hopes for an improving economic outlook and a growing appetite for risk among investors, a factor given further impetus by Asian and U.S. stock market gains.  Continued...
Original article

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