Wednesday May 7, 12:55 PM
Oil steady after yesterday's record high prices, U.S. inventory data in focus
LONDON (Thomson Financial) - Oil held steady ahead of weekly U.S. inventory data after rallying to a new record high Tuesday.
Energy traders awaited Wednesday's U.S. Energy Information Administration report, due at 3:30 p.m., which is expected to report crude inventories in the week to May 2 rose by 1.9 million barrels, while refinery runs increased by 0.5 percentage points following last week's fall to 85.4 percent.
Gasoline stockpiles are expected to have dropped by 200,000 barrels ahead of the peak demand driving season, analysts predicted, while distillates, which include heating oil, are seen rising by 1.3 million barrels.
Supply concerns from Nigeria and Iran, coupled with a bullish Goldman Sachs (NYSE: GS - news) oil price forecast, for $200 within two years, sparked the rally yesterday.
'Oil at $200 a barrel is certainly a possibility in the medium term,' said Ben Coleman, head of commodities at TradIndex. 'In the past week, we've seen the oil price climb 12 percent and I see no reason why that should be reversed. The constant risk of attacks on pipelines in Nigeria is the catalyst for these new highs, along with talk from OPEC that they will sustain current supply levels. We may see a small correction today on the back of the U.S. Department of Energy numbers, which are predicted to show an increase in inventories, but I'm not holding my breath. The long-term trend is still upwards.'
At 12:24 p.m., New York-traded West Texas Intermediate crude for June delivery was up 6 cents to $121.90 a barrel, having yesterday hit a record high of $122.73 a barrel.
In London, Brent crude for June delivery was up 13 cents at $120.44, having yesterday touched an all-time record of $120.99.
Iran said Monday it would reject any offer that violates its right to master the full nuclear fuel cycle after world powers said they had prepared a new package to end the atomic crisis.
The West fears Iran could use uranium enrichment to make atomic weapons.
Iran denies it wants to do this and insists it has a right to enrich and make nuclear fuel as a signatory to the nuclear Non-Proliferation Treaty.
Meanwhile in Nigeria, rebels promised on Tuesday to halt attacks on the oil industry if the Nigerian government would allow former U.S. President Jimmy Carter to act as a mediator.
'Nigerian and Iranian situations still lurk in the background as bullish variables, this despite an offer by the MEND rebels to institute a ceasefire if former president Carter agrees to mediate the dispute,' said MF Global analyst Ed Meir. 'The rebels have already agreed to Carter's appointment, but the government has yet to respond. With respect to Iran and its latest rejection of the big-power proposals, we seem to be back to square one and this issue will undoubtedly remain as one of the thornier issues out there.'
Elsewhere, the dollar's next move is likely to have an impact on the price for most commodities. Commodities tend to move counter to the dollar as they are seen as alternative assets.
Investors are waiting for more economic data from the United States to solidify their views on what will be the Federal Reserve's next move -- whether it would keep its key interest rates on hold for a while or continue its monetary easing. Today, the world's biggest economy's data includes first quarter productivity and costs, March housing forecast/pending home sales index and consumer credit.
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