Oil up on US gasoline draw, equities weigh
New York: Crude oil rebounded on Wednesday on a sharp decline in US gasoline stocks, but persistent worries about economic growth curbed gains.
Prices rose in early trade to near two-week highs, lifted by initial gains on Wall Street and a late Tuesday report by American Petroleum Institute showing a steep drop in domestic gasoline inventories last week.
Later, the market pared gains when the US Energy Information Administration confirmed the gasoline drawdown. EIA data also showed a steep build in crude stockpiles, capping the day's rally.
A downturn on US equities in New York also weighed on prices, as sentiment wavered after pushing higher on strong earnings. Worries about the euro zone debt crisis and mixed US economic data have kept investors cautious for much of August.
In London, ICE Brent for October delivery settled USD 1.47 higher at USD 110.60 a barrel, having traded as high as USD 111.74, the steepest hike since August 4.
It slipped to USD 98.74 on August 9, the lowest since February, on concern about an economic slowdown.
US crude for September delivery closed at USD 87.58, gaining 93 cents, after pushing to a session high of USD 89, also the highest since August 4.
Brent's premium against the US October crude contract closed at USD 22.87, widening from USD 22.29 on Tuesday. The WTI/Brent spread hit a record USD 26.08 on August
"The Brent market reestablished an upside leadership role today with the October contract making its debut as spot month," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
"Despite reports that Saudi production popped by more than 10 percent in June to 9.8 million barrels per day, the major global crude benchmarks are showing signs of tightening with Libya and Cushing providing primary catalysts in this regard," Ritterbusch added.
Saudi Arabia produced 9.8 million bpd in June, rising more than 900,000 from May, while exports rose to their highest level since the financial crisis hit demand in 2008, data from the Joint Data Initiative showed.
Improved risk sentiment pushed the Relative Strength Index of US crude to 43.96 percent, after dipping to 41.25 on Tuesday. Recent buying has lifted the index from the 20.16 low hit on August 9, well below the 30 level that signifies oversold conditions.
In London, ICE Brent's RSI also improved to more than 48, from 44.38 on
US gasoline stockpiles shrank 3.5 million barrels last week, data from the US Information Administration showed.
That overshadowed an unexpected 4.2 million barrel rise in US commercial crude oil inventories, which was against the forecast for a drawdown of 800,000 barrels.
However, stocks the key Cushing, Oklahoma, delivery hub fell nearly 900,000 barrels to 33.7 million barrels, their lowest level since mid-November.
Commercial crude stocks rose as the US government continued releasing supplies from the Strategic Petroleum Reserve, part of a coordinated effort with members of the International Energy Agency to cover barrels lost due to fighting in Libya.
A drop in refinery utilization and higher imports further contributed to higher crude stocks, EIA data showed.
A meeting between the French and German leaders on Tuesday did not calm investor concern about Europe's sovereign debt problems and some analysts said the worries could again prove a drag on oil prices.