Oil steadies, but global supply fears intensifying
SINGAPORE - Oil steadied on Thursday, after a spike of more than $5 pushed prices closer to last week's record high, as a steep drawdown in inventories in the United States heightened supply concerns globally.
US crude oil prices were up 20 cents at $136.58 a barrel, after jumping $5.07 to $136.38 a barrel in the previous session, coming within reach of last week's record above $139.
Analysts said a sluggish US dollar and supply flow disruptions in OPEC member Nigeria, helped keep oil on the boil.
"The weakness of the US dollar is a very important factor, and hedge funds are using this as an indicator to keep money in energy and commodities," said Takeda Makoto, an analyst at Bansei Securities.
Swelling demand from China and other developing countries has boosted oil prices nearly 40 percent so far this year, pressuring major consumers like the United States that are already struggling to cope with a housing slowdown and credit crunch.
Representatives of the world's biggest oil consumer and producer nations will meet in Saudi Arabia on June 22 to discuss soaring oil prices, which producer group OPEC says are due to speculation, not a lack of supply.
But Venezuela's President Hugo Chavez said no decision would be taken at the meeting on production levels.
On Wednesday, the US Energy Information Administration reported that crude stockpiles dropped 4.6 million barrels last week, the fourth consecutive weekly decline amid soft import levels, and the biggest drop since early May.
Dealers said a decline in the US dollar on Wednesday also encouraged buying. The weak greenback in recent months has drawn billions of dollars into commodity markets as investors seek a hedge against inflation.
Oil prices also got a boost from news that Shell Oil was extending its force majeure on oil shipments from Nigeria through July following a spate of rebel attacks on facilities earlier this spring.
Industry experts also pointed to figures from China showing a 25 percent year-on-year increase in oil imports last month, evidence of stockpiling ahead of the Beijing Olympics in August and increased demand for fuel after recent earthquakes.