Oil held steady above $74 today, buoyed by industry data showing a sharp drawdown in US crude stocks and an unexpected fall in gasoline supply, but the firm dollar limited gains.
Crude inventories in the world's biggest oil consumer fell 3.7 million barrels last week, against analysts' expectations of a 900,000-barrel drop, the American Petroleum Institute (API) said yesterday.
US crude for February edged up 6 cents to $74.46 a barrel by 0713 GMT in thin pre-holiday trade, after rising 68 cents yesterday. Prices have gained almost $6 since hitting a more than two-month low of $68.59 on December 13th.
London Brent crude for February rose 2 cents to $73.48.
"The API data (is bullish) and the market anticipates EIA data tomorrow to show resonably significant drawdown in the crude stocks as well as in some of the oil products stocks," said Ben Westmore, commodities economist at National Australia Bank.
"That's sort of positive short-term sentiment."
Gasoline inventories fell 1.1 million barrels as imports also slipped, API data showed, after a Reuters poll forecast a 1.2 million-barrel build.
Inventories of distillate fuels fell by just 745,000 barrels, against forecasts for a 1.9 million-barrel drop, despite cold weather in the U.S. Northeast, the biggest heating oil market in the world. Total US heating oil inventories fell by 993,000 barrels.
The US Energy Information Administration's (EIA) weekly report is due at 10.30am EST (3.30pm GMT) today.
Oil's recovery was curbed by the strengthening dollar, which hit a two-month high versus the yen on positive US economic news and the steepest yield curve on record. The dollar also held firm against a currency basket.
Oil prices have often retreated this year when the dollar firms, making crude more costly for holders of other currencies. A stronger dollar can also signal investors putting funds into safe havens and away from assets deemed more risky, including commodities.
Gold edged up on bargain hunting today after the price fell to its lowest in seven weeks the previous day, but a firmer US dollar was likely to cap gains.
Further optimism about an economic recovery was reflected by surprisingly strong sales of previously owned US homes, which boosted Western stock markets, and Asian equities followed suit. US existing home sales jumped 7.4 per cent in November to an annual rate of 6.54 million units, the fastest pace since February 2007.
"Obviously there is some macro indicator in the United States that also looks quite supportive as it continues to show the recovery is in good feel," said Westmore.
As expected, the Organization of the Petroleum Exporting Countries (Opec) left output policy unchanged with the implied target for members' output, excluding Iraq, at 24.84 million barrels per day (bpd).
But concerns remain about compliance and the organisation's ability to persuade members to stick to quotas.
Reuters