17 July 2014 – Brent futures held above $107 per barrel on Thursday as a sharp drop in US crude stockpiles and promising economic growth data from China indicated an improving outlook for demand in the world’s top two oil consumers, according to a report.
Continued worries about the geopolitical situation in North Africa, the Middle East and Ukraine also underpinned oil prices, Reuters reported.
The Brent contract for September, which became the front-month contract on Thursday, rose $0.03 to $107.20 by Thursday morning.
The August contract, which expired on Wednesday, dropped $0.17 to settle at $105.85 per barrel, the news wire said.
US crude for August delivery climbed $0.24 to $101.44, after closing up $1.24 in the previous session.
Oil prices rose in Asia following overnight gains after a larger-than-expected drawdown in overall US stockpiles and at the Cushing, Oklahoma delivery hub, Phillip Futures senior commodities manager Avtar Sandu told Reuters.
A rise in US refining activity caused crude stocks to fall by 7.5 million barrels last week, the biggest draw since January and larger than the 2.1 million drawdown forecast by analysts, the US Energy Information Administration said in its weekly report.
“The economy in the US is on track to grow. The Chinese economy increased a bit – the growth figures were slightly higher so some support for oil is coming in from the demand side,” Sandu said.
China saw slightly better-than-expected economic growth of 7.5% in the second quarter this year, according to government data on Wednesday.
The country’s implied oil demand rose to 10.2 million barrels per day in June, its highest level since January 2013, according to Reuters calculations based on preliminary government data.
“I don’t expect oil to drop after this bounce,” said Sandu, who forecast Brent would end the week around $108 and West Texas Intermediate would close the week around $102.
Investors are keeping an eye on geopolitical tensions for further trading cues.
In Libya, oil exports through its two largest eastern ports, capable of exporting 500,000 barrels per day, will not start before August, an official said on Wednesday.
Exports through Brega have stopped due to a protest by oil guards, while 20 aircraft were damaged by shelling at Libya’s main airport in the worst fighting in the capital Tripoli in months as rival militia battled for control.
Russia is facing tougher sanctions from the US and Europe over the situation in Ukraine where 11 soldiers were killed on Wednesday as government forces battled pro-Russian separatists in the east of the country.
Rosneft – Russia’s largest oil producer – was among the firms targeted by further US sanctions announced Wednesday at the same time as Europe agreed to impose its own package.