Oil bulls drive crude to 2015 high on fall in U.S. stocks

[May 06, 2015]  By Himanshu Ojha

LONDON (Reuters) - Oil prices rose more than a dollar to 2015 highs on Wednesday, as a month-long rally gained further impetus from a fall in U.S. crude stocks and conflict in the Middle East.

Brent crude  was up $1.43 to $68.88 a barrel by 1129 GMT, after hitting a 2015 peak of $69.15.

U.S. crude traded $1.36 higher at $61.76 a barrel, near an intraday high of $62.08.

"Bulls are in control of the market," said Tamas Varga and Stephen Brennock, analysts at London brokerage PVM Oil Associates, in a note on Wednesday.

Industry group the American Petroleum Institution (API) said on Tuesday U.S. crude oil stocks fell, giving a lift to prices.

API said overall stocks fell by 1.5 million barrels while stocks at the key delivery point of Cushing, Oklahoma fell by 336,000 barrels.

The U.S. government's Energy Information Administration will issue official stockpiles data later on Wednesday.
 

The fall in crude stocks was likely to be interpreted as "sign that the market is beginning to tighten" said Germany's Commerzbank on Wednesday.

Conflict in Yemen continued on Wednesday after witnesses said planes from a Saudi Arabia-led coalition struck Yemeni towns overnight, following mortar attacks from Iran-allied Shi'ite Houthi rebels.

While Yemen is only a small oil producer, it sits on key shipping routes and any conflict involving its neighbour Saudi Arabia, the world's leading oil exporter, shakes the market.

In Libya, protests have stopped crude flows to the eastern port of Zueitina. Libyan output is currently below 500,000 barrels per day, a third of what the country pumped before 2010.

Oil prices also drew support as the dollar fell 0.3 percent against a basket of currencies, on course for a fourth straight weekly loss.

A weaker dollar makes greenback-traded commodities such as crude oil more attractive for holders of other currencies.

Oil's rise in May followed a 20 percent rally for Brent and 25 percent for U.S. crude prices in April, despite indications from some OPEC delegates that the Organization of the Petroleum Exporting Countries (OPEC) may keep production unchanged at current high levels at a meeting next month.

Analysts from Energy Aspects said the bull market would run out of momentum.

"Near-term fundamentals continue to look dire," they said in a note.

"We maintain our view that even though $70 seems likely in the short term, a downward correction is still on the cards."

(Additional reporting by Jacob Gronholt-Pedersen and Jessica Jaganathan in Singapore, editing by William Hardy and David Evans)

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