Oil rises to $72 as IEA raises demand outlook

Oil firmed to $72 a barrel on Thursday after the International Energy Agency raised its estimate for 2009 oil demand, adding to signs the fall in consumption may have bottomed out; just as the British Petroleum (BP) said that the world’s proven oil reserves last year plunged to an all time low, the first drop in a decade.

World oil demand will contract by less than previously expected this year, the International Energy Agency said as it raised its 2009 forecast for the first time since August 2008.

“Markets are currently in a phase of identifying green or bamboo shoots,” and the IEA report “will likely be taken as an additional green shoot,” said Olivier Jakob, oil analyst at Petromatrix.

U.S. crude rose 71 cents to $72.04 a barrel by 1105 GMT, a near eight-month high. Brent crude gained 50 cents to $71.30.

Falling inventories in top oil consumer, the United States, also supported prices.

U.S. crude stocks fell by a sharp 4.4 million barrels last week, against expectations for a modest draw of 400,000 barrels, while products inventories also dropped, the Energy Information Administration (EIA) reported on Wednesday.

Gasoline inventories fell 1.6 million barrels last week against forecasts for 800,000-barrel build as gasoline demand rose by 0.4 percent over the four-week period, the start of the U.S. summer driving season, the EIA said.

Distillate stocks, including diesel and heating oil, fell by 300,000 barrels, versus analysts’ expectations for a 1.4 million barrel increase.

Data from China, the second-largest oil consumer, suggested rising demand.

China’s crude imports in May rose 5.5 percent from a year ago, the second-highest volume on record, the General Administration of Customs said on Thursday.

The U.S. dollar fell again against a basket of currencies on Thursday, adding support to dollar-denominated commodities.

Meanwhile, the British Petroleum (BP) has said that the world’s proven oil reserves last year plunged to an all time low, the first drop in a decade.

The proven reserves of 1.258 trillion barrels last year of BP were down by three billion barrels from the 2007 reserves figure.

The oil giant in its statistical review of world energy made available to newsmen on Thursday in Lagos noted that energy consumption by members of the advanced economies fell behind consumption by all other nations including China for the first time.

“In 2008 the world was no longer supply constrained, as production growth exceeded that of consumption for all fossil fuels, particularly later in the year,” said Tony Hayward, the group chief executive of BP.

“Our data confirm that the world has enough proven reserves of oil, natural gas and coal to meet the world’s needs for decades to come,” he added.

“The challenges the world faces in growing supplies to meet future demand are not below ground; they are above ground. They are human, not geological.”

The oil company said increases in proven oil reserves in Vietnam, India and Egypt were offset by falls in Russia, Norway and China.

Middle Eastern producers accounted for 59.9 percent of global reserves, led by Saudi Arabia with 21 percent.

The 2007 figure had been revised higher by 23.1 billion barrels, with the largest upward revisions in Venezuela and Angola, BP said.

Global oil production rose by 0.4 percent last year on the strength of a 2.7 percent boost in output from OPEC countries, according to the BP report.

Read From the Source, http://BusinessDayOnline.com