Oil prices rise as US inventories look set to drop further

Oil prices rose on Wednesday as US inventories were set to drop further and after the Energy Information Administration (EIA) raised its 2015 oil demand growth forecast.

Front-month US crude rose by a dollar to $61.14 a barrel at 0550 GMT, before dipping to $61.03 by 0602 GMT. Brent futures were up 68 cents at $65.56 a barrel.

The gains came after prices for crude oil, gasoline and diesel jumped more than 3 per cent on Tuesday as bullish investors made bets across the oil complex for another weekly fall in US stockpiles.

The US government’s EIA will issue official inventory data on Wednesday.

Industry group American Petroleum Institute (API) estimated a draw of around four times the 1.7 million barrels seen in a Reuters poll of five analysts.

“Since we expect further drops in the inventory figure, we expect some upward movements ahead,” said Singapore-based Phillip Futures said .

On the demand side, the EIA raised its 2015 world oil demand growth forecast by 20,000 barrels per day to 1.25 million bpd.

Despite the rallies this week, analysts said that big further gains were unlikely due to continued oversupply.

"With US production still around record levels, Opec keeping its output quota unchanged at 30 million barrels per day and indications that Opec members may even increase its production, the situation of oversupply will remain longer than expected. This, combined with our forecast for a stronger U.S. dollar, will keep downside risks alive," ABN Amro said in its June monthly commodity update.

Saudi Arabia, the world’s top crude exporter, will supply full contracted volumes of crude oil to at least two Asian term buyers in July, unchanged from June, following Opec’s decision to maintain its production target, industry sources familiar with the matter said on Wednesday.

The Opec kingpin has supplied full contractual volumes to most Asian buyers since late 2009, implying that the Saudis still want to defend market share via high volumes rather than prop up prices through supply cuts.

In Japan, Asia’s second biggest economy, crude runs dropped 0.31 barrels per day (bpd) in the week to June 6 to 2.56 million bpd, and crude stocks were up 6.74 million barrels at 99.62 million barrels.

Reuters