Crude Oil Climbs On Implied Demand

Crude oil surprised investors by climbing 46 cents in the Asian session to touch 95.43 against a stronger US dollar. The upward forecast of growth by the World Bank helped increase implied demand for the black gold. Crude oil clung to modest gains on Tuesday after a swift early rally fuelled by a bullish global demand forecast and new concerns over Libyan oil exports succumbed to profit-taking. Global oil demand will rise more quickly this year as economic growth in industrialized countries accelerates, absorbing more supply even as U.S. shale oil production reaches record highs, the West’s energy watchdog reported yesterday.  Brent oil gained 24 cents to reach 107.10. Russia will at least keep its oil production at record-high levels this year thanks to strong performance at new fields but there is little chance of significant further gains in output, analysts and officials said. Nymex crude oil prices increased around 0.7 percent yesterday on the back of expectations of increase in global crude oil demand by 1.3 million barrels a day to 92.5 million barrels a day in 2014 by International Energy Agency (IEA). Further, agency forecasts that Organization of Petroleum Exporting Countries (OPEC) crude oil demand will increase and need to supply an average of 29.4 million barrels a day in 2014 which is around 200,000 a day more from its previous estimates in last month.

 Additionally, total oil inventories monitored by Organization for Economic Cooperation and Development (OECD) were less than five year average in more than a decade as per the IEA. Stockpiles of crude and refined products were at 99.5 million barrels below the five year mean in November at 2.6 billion barrels after as fall of 53.6 million. The decline in inventories was steepest fall since 2011. Saudi Arabia oil output rose by 75,000 barrels a day to 9.82 million barrels a day in last month. Production in Iran started after some relief on sanctions front after temporary curbing its nuclear program increased by 40,000 barrels a day to 2.75 million barrels a day in the last month.

The American Petroleum Institute (API) is scheduled to release its weekly inventories today and US crude oil inventories are expected to gain by 1.6 million barrels for the week ending on 17th January 2014. Gasoline stocks are expected to gain by 1.6 million barrels and distillate inventories are expected to plunge by 0.4 million barrels for the same week. Gasoline prices climbed 23 points to trade at 2.6349 this morning.

Natural gas eased by 9 points to trade at 4.464 as traders took advantage of the steep climb on Tuesday to book profits.  Natural gas rose for a second day on Tuesday as a winter storm brought heavy snow and frigid weather to the U.S. East Coast, stoking demand for heating fuel. Heating oil climbed this morning by 116 points to trade at 3.0360. “Bitter cold” is forecast to sweep east of the Mississippi River through the end of January