Oil slipped toward $87 per barrel on Wednesday as the impact of a stronger dollar and a fall in Chinese oil imports outweighed news of a big drop in U.S. crude oil inventories.
The dollar rose around 0.40 percent against a basket of currencies, its fourth day of gains after several months of losses ahead of the announcement of a second round of monetary stimulus.
Data showing a substantial fall in Chinese crude imports in October also weighed on oil. China’s crude imports fell 30 percent in October to 16.39 million tons, the lowest in at least 18 months, from a record in September, customs data showed on Wednesday.
U.S. crude futures for December fell 30 cents to $86.42 by 1230 GMT, after reaching $87.63 on Tuesday, its highest since October 2008. ICE Brent fell 30 cents to $88.03 per barrel.
The dollar rise and Chinese data overshadowed the impact of a bullish inventory report late on Tuesday by the American Petroleum Institute (API), which said U.S. crude stockpiles dropped a surprise 7.4 million barrels last week, defying expectations of a 1.4 million-barrel build.
“The API crude data is supportive for oil and significant because the figures add up,” said Christophe Barret, global oil analyst at Credit Agricole in London.
“Crude stocks dropped because U.S. imports fell and refinery runs increased to take advantage of a shortage of products in Europe during the French refinery strikes. But the strikes are over now, so it is only a temporary support for prices.”
Oil prices have dipped slightly so far this week, but gained more than 7 percent last week and technical analysts said charts showed little sign of an immediate downward correction.
Clive Lambert, analyst at FuturesTechs, said he was “not too concerned” about the sustainability of the move upwards because of a strong band of support below current prices.
The International Energy Agency, which advises 28 industrialized countries, has raised its oil price forecasts, citing growing supply uncertainty and looking toward prices at over $200 per barrel by 2035.
Analysts warned against reading too much into a single set of trade data from China, the world’s second-largest oil user.
The average of Chinese crude imports for September and October, at 19.84 million tons, is roughly in line with averages seen for the first eight months of the year at 19.73 million, suggesting re-stocking took place in the month before October’s week-long National Day celebrations.
Tuesday’s API industry report pointed to tightening fuel supplies in the United States. Stockpiles of distillates, including heating oil and diesel, dropped by 4 million barrels in the week to November 5, while gasoline inventories slipped 3.4 million barrels.
Markets await confirmation of this declining trend across fuel categories from the U.S. Energy Information Administration, set to release government data on inventories and demand on Wednesday at 1530 GMT.
U.S. crude inventories were forecast to have increased by 1.4 million barrels last week, a Reuters survey showed, while stocks of distillates including heating oil and diesel were expected to have fallen 1.9 million barrels. Gasoline stockpiles were forecast to have dropped 800,000 barrels.
The EIA raised its 2011 world oil demand forecast by 33,000 barrels per day, to 87.77 million bpd, from its previous monthly forecast, and now sees a year-on-year rise of 1.44 million bp. Source:Reuters