Oil climbs to near $60 on falling US inventories

[May 13, 2009]  VIENNA (AP) -- An unexpected drop in U.S. crude inventories propelled oil prices to near $60 Wednesday on indications that demand may be picking up.

Still, forecasts were less than rosy. OPEC, in its monthly report, said it expected oil demand for next year to grow less than in its previous estimate because of continued clouds over the world economy.

Benchmark crude for June delivery was up 87 cents to $59.72 a barrel by noon in European electronic trading on the New York Mercantile Exchange. On Tuesday, the contract rose to a six-month high of $60.08 a barrel before settling at $58.85, up 35 cents.

The American Petroleum Institute said oil stocks fell 3.13 million barrels to 370.7 million last week. Analysts had expected a gain of 1.4 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

"The big driver today is the API number," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "That's a pretty big draw when people were expecting a build."

Investors will also be watching for the weekly petroleum inventory data from the Energy Department's Energy Information Administration on Wednesday. According to the EIA, crude stocks have risen ten consecutive weeks and are near 19-year highs.

Prices have jumped from below $35 a barrel in February on investor optimism that the worst of a severe U.S. recession is over. However, some traders are skeptical that still-weak global crude demand can justify the recent rally.

"There's a good chance the price will blast through $60 in the short run," Chu said. "But I don't see the demand out there yet."

Trader and analyst Stephen Schork also suggested markets were out of sync with realities.

"Supplies are high and rising while demand is low and falling -- but it just doesn't matter," he said in his Schork Report. "Stock markets are rising and the dollar is falling.

"In other words, this market is rising not because of fundamentals."

OPEC's monthly forecast also suggested that the global appetite for crude remains weak.

It said that world oil demand would increase next year by 1.6 million barrels a day -- 200,000 barrels less than it had previously estimated. And it said global oil demand actually shrunk by 2.4 million barrels a day in the first quarter of this year.

In other Nymex trading, gasoline for June delivery rose more than 2 cents to $1.69 a gallon and heating oil gained nearly 2 pennies to $1.52 a gallon. Natural gas for June delivery jumped over 6 cents to $4.51 per 1,000 cubic feet.

In London, Brent prices rose 37 cents to $58.31 a barrel on the ICE Futures exchange.

[Associated Press; By GEORGE JAHN]

Associated Press writer Alex Kennedy contributed to this report from Singapore.

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