30 May 2014, News Wires – Brent futures held above $110 a barrel on Friday as a steep drawdown in US gasoline stockpiles revived hopes of steady demand growth in the world’s top oil consumer, with geopolitical tensions over Ukraine providing additional support.
US gasoline stocks fell 1.8 million barrels, data from the Energy Information Administration showed, compared with expectations of a 300,000-barrel gain, indicating a strong start to the summer driving season.
Investors still caution that oil may be prone to a correction following gains in the last few weeks on supply disruption concerns.
Brent crude gained 7 cents to $110.04 a barrel early on Friday, and is set to rise nearly 2% for the month. US oil slipped 21 cents to $103.37, partly under pressure from an overall rise in US crude stocks and gains overnight. It is set to rise nearly 4% this month.
“Better gasoline demand bodes well for the US economy,” said Tony Nunan, oil risk manager at Mitsubishi in Tokyo.
“Overall, I see oil supported by geopolitical tensions and an improving demand outlook.”
Total US crude inventories rose 1.7 million barrels in the last week, compared with analysts’ expectations for an increase of 500,000 barrels. But crude stocks at the Cushing, Oklahoma, delivery hub fell 1.53 million barrels, the EIA said.
Oil and the broader financial market ignored US data that showed the world’s biggest economy contracted for the first time in three years in the first quarter and focused on signs of a rebound in the second quarter.
In Ukraine, investors worry that any worsening in the crisis will further escalate tensions between Russia, the world’s second-largest oil exporter, and the West.
Pro-Russian separatists shot down a Ukrainian army helicopter on Thursday, killing 14 soldiers including a general, as government forces pressed ahead with an offensive to crush rebellions in the east swiftly following the election of a new president.
Concerns of continued disruption to north African exporter Libya were countered by expectations of rising Middle East supply.
Iran’s crude exports increased in May after a decline in April, according to sources who track tanker movements. Iran’s exports have averaged 1.38 million barrels per day in May, one of the sources said. That represents an increase from 1.1 million bpd in April, as estimated by the Paris-based International Energy Agency.
Brent is expected to break support at $109.41 and fall further to $108.43, while US oil is expected to retest support at $102.67, according to Reuters technical analyst Wang Tao.