Wednesday, June 10, 2009


Singapore - Crude oil futures in Asia breached USD71 a barrel Wednesday as traders bet that weekly U.S. crude inventory data will show larger-than-expected drawdowns on an improving global economy.

Data from the U.S. Energy Information Administration later Wednesday may show that crude oil inventories fell by 700,000 barrels, according to the average estimate of analysts surveyed by Dow Jones Newswires.

"Although there is a lack of focus on current supply-demand fundamentals, investors still have one eye watching inventory," said Jonathan Kornafel, director for Asia at Hudson Capital Energy in Singapore.

"If we see another withdrawal, it gives funds and investors one more reason to push prices higher."

On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at $71.05 a barrel at 0708 GMT, up $1.04 in the Globex electronic session. July Brent crude on London's ICE Futures exchange rose 83 cents to $70.45 a barrel.

A broad rise in Asian share markets and a weakening U.S. dollar helped oil prices reach a new seven-month intraday high during Asia trading.

"A weaker dollar is definitely a factor that explains some of the movement in price," said Toby Hassal, an analyst for Commodity Warrants Australia in Sydney. "A lot of speculative funds are flowing into the oil market."

Some analysts cautioned that the rise in crude prices was short-lived because demand for gasoline and other products was still weak.

"Demand for petroleum products in the aggregate fell off the proverbial cliff in the week following the U.S Memorial Day holiday," wrote analysts at the Schork Report in a note to subscribers. Meanwhile, "crude oil supplies are flush, as is the capacity to refine it."

In fact, oil prices eventually should fall back in the near-term, said David Moore, commodities strategist for Commonwealth Bank of Australia.

"Oil market fundamentals remain fragile, and there is an anticipatory element in the gains," he said, noting that prices would quickly reverse on weak economic data.

At 0709 GMT, oil product futures were up.

Nymex reformulated gasoline blendstock for July - the benchmark gasoline contract - rose 180 points to 198.47 cents a gallon, while July heating oil traded at 182.56 cents, 180 points higher.

ICE gasoil for July changed hands at $565 a metric ton, up $9.75 from Tuesday's settlement.