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Oil up 2 percent, Brent paces on tight North Sea outlook
NEW YORK |
NEW YORK (Reuters) - Crude oil futures surged on Wednesday, ending more than 2 percent higher after a volatile session despite a mixed message from the U.S. Federal Reserve that it may opt for more easing policies, but only if the economy weakens further.
Brent crude paced the market, supported by news that the combined daily loading volume of the four benchmark North Sea crude oil streams was expected to fall to a record low in August based on Reuters calculations, traders said.
Minutes of the Fed's June meeting, released 30 minutes before the close of trading, showed more Fed asset buying was not imminent and only likely if economic conditions worsened.
"Today's FOMC meeting (minutes) weighed heavily on equities and the euro but was largely shrugged off by the energy complex," said Jim Ritterbusch, president of the Ritterbusch & Associates consultancy in Galena, Illinois.
"The oil market's show of strength in the face of the FOMC minutes is yet another bullish consideration to the oil market," he added.
U.S. government data showed crude inventories fell 4.7 million barrels last week, almost four times the forecast in a Reuters poll. Analysts said the news had a limited impact on oil prices. <EIA/S}
The bulk of the drawdown was in the West Coast, which is not connected to other petroleum regions, data from the U.S. Energy Information Administration (EIA) showed. Refined product stockpiles rose much more than expected, neutralizing the drop in crude stocks, the EIA data also showed.
In London, Brent crude for August delivery settled at $100.23 a barrel, up $2.26, after hitting an intraday high of $100.50. In post-settlement trading, the contract further extended the day's high to $100.83.
U.S. crude gained $1.90 to settle at $85.81, after hitting a session high of $86.49
On Tuesday, oil fell more than 2 percent after a strike by Norway's offshore oil workers ended when the government ordered compulsory arbitration. This eased fears that North Sea supplies would tighten. Data also showed that China's oil imports fell in June, reinforcing fears of a global economic slowdown hurting fuel demand.
TECHNICALS, BUYING OPPORTUNITY
Some analysts attributed part of Wednesday's rebound in oil prices to technical support and investors repositioning after a recent fall in prices.
"U.S. crude broke above its Tuesday high of $85.95 and hit buy stops," said Addison Armstrong, senior market research director at Tradition Energy in Stamford, Connecticut.
Some investors also think that after recent lows were hit, crude futures are a good buy, being still in a big discount from the highs for the year, said Rich Ilczyszyn, chief market strategist at iiTrader.com in Chicago.
"People are extending their long positions, with (U.S. crude) prices aiming for $89," he added
Brent crude hit a 2012 settlement high of $128.40 on March 1, and remains 22 percent below that level. U.S. crude climbed to the year's high of $110.50 on the same day and is still 22 percent below that high.
Low volumes contributed to the day's volatility, with Brent crude trading down 17 percent from its 30-day average while U.S. crude was off 16 percent from its 30-day average, according to Reuters data.
Prices rose despite lower global oil demand growth forecasts from the EIA and the Organization of the Petroleum Exporting Countries (OPEC).
The EIA cut its world oil demand growth forecast for 2012 and 2013 while OPEC said that demand growth will slow in 2013 from what is already a weak level this year. The group, which produces a third of global oil, said daily average demand for its crude would stay below its current production levels.
(Additional reporting by Robert Gibbons in New York, Julia Payne and Simon Falush in London, Florence Tan in Singapore; editing by Jim Marshall, Marguerita Choy and David Gregorio)
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