LONDON // Oil rose above $73 per barrel on Wednesday after several days of falls, supported by industry data showing a big drop in US crude stocks and the dollar's weakness. The American Petroleum Institute (API) said in a report late on Tuesday that crude inventories in the world's top oil consumer fell 5.8 million barrels last week, bucking expectations for a rise, as refiners boosted fuel production.
US crude for January delivery rose 88 cents to $73.50 per barrel by 0856 GMT, after falling $1.31 on Tuesday. NYMEX crude, which hit its lowest level since late November at $72.43 on Monday, has lost more than 7 per cent this month. London Brent crude gained 78 cents to $75.97. Losses over the last five days have been partly driven by a recovery in the dollar. Oil is priced in dollars so a rise in the currency makes fuel more expensive to most consumers.
The dollar index against major currencies was down 0.3 per cent in early London trade on Wednesday. "The oil market is seeing a correction after several days of heavy falls," said David Wech, head of energy studies at JBC Energy in Vienna. "The inventory data is clearly a factor." The oil market also received some support from Saudi Oil Minister Ali al Naimi, who said Gulf economies were strong despite anxieties over financial strains in the region, easing fears Dubai's debt problems would hamper economic recovery.
"The soundness and growing diversification of our regional economy will help restore calm following the turbulence of the moment," he told a petrochemicals conference in Dubai. The API data on Tuesday showed US gasoline inventories fell by 753,000 barrels, while distillates, which include heating oil and diesel, rose by 1 million barrels. However, crude oil stocks at Cushing, Oklahoma, the delivery point for oil futures traded on NYMEX, rose 1.5 million barrels, helping push down the price of front-month crude futures, creating the deepest front-month discounts since August.
Analysts say they expect the contango to deepen further over the next few weeks with no return to backwardation until well into 2010 as US oil demand stays relatively weak. Further pointers on US stockpiles will come from weekly Energy Information Administration (EIA) data due later on Wednesday. An expanded Reuters poll has forecast a 600,000-barrel rise in US crude oil stocks. US crude oil futures surged to a year high of $82 per barrel in October, from below $33 last December.