Oil prices build on gains

LONDON - World oil prices on Thursday extended gains won a day earlier on data that revealed steep falls in US energy stockpiles.

By (AFP)

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Published: Thu 29 Jun 2006, 7:25 PM

Last updated: Sat 4 Apr 2015, 1:15 PM

Markets were awaiting an expected interest-rate hike by the US Federal Reserve amid concerns that higher borrowing costs could start to hit demand for energy.

New York’s main contract, light sweet crude for delivery in August, climbed 27 cents to 72.46 dollars per barrel in electronic deals before the official opening of the US market.

In London, Brent North Sea crude for August delivery rose 68 cents to 72.09 dollars per barrel in electronic trading.

“Oil futures were higher following on from yesterday’s gains that were driven by data showing a larger than expected fall in US gasoline and crude stocks and strong US gasoline demand,” Sucden analyst Sam Tilley said.

Crude futures had risen on Wednesday after the Department of Energy (DoE) said that US reserves of gasoline, or petrol, had fallen by one million barrels to 212.4 million last week. Analysts’ consensus forecast had been for a rise of 450,000 barrels.

Crude oil reserves meanwhile fell by 3.4 million barrels to 343.7 million over the week ended June 23, DoE added in its weekly market update.

Gasoline stocks are taking a pounding amid the ongoing peak-demand driving season, during which many Americans fill their tanks and hit the roads for their summer holidays.

The DoE said Wednesday that demand for gasoline rose 1.2 percent in the week that ended June 23 from the prior week to 9.54 million barrels per day, matching its record high set for the first time in August 2005.

Over the past four weeks, US gasoline demand has run 0.9 percent higher than in the same period a year ago, “suggesting that demand is not being as affected by high prices as previously thought”, Tilley said.

He added that the market would closely watch US economic data and the outcome of the US Federal Reserve rate-setting meeting Thursday for any signs that US demand may falter ahead.

Tony Nunan, manager for energy risk management at Mitsubishi Corp’s international petroleum business in Tokyo, said “everyone was concerned that high interest rates would reduce economic performance, in turn weighing on demand”.

Market participants are anticipating a quarter-point US rate hike, the 17th in a row, to take the federal funds rate to 5.25 percent. Some even see a possible half-point hike.

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