LONDON (AFP) – World oil prices rallied on Wednesday, hitting a new five-month peak in New York, despite expectations that a key report will show rising crude inventories in key consumer the United States.
New York’s main futures contract, light sweet crude for June delivery added 36 cents to 54.20 dollars a barrel, after earlier hitting 54.44 dollars — the highest level since last November.
Brent North Sea crude for delivery in June rose 43 cents to 54.54 dollars a barrel, one day after hitting 54.91 which was also a five-month pinnacle.
Crude futures on Tuesday began hitting multi-month highs on hopes of a recovery in energy demand, alongside rising stock markets and a weak dollar.
“Oil prices continued their upward trend of the past few days,” said Dresdner Kleinwort analyst Eugen Weinberg.
“The combination of strong equity markets and a weaker US dollar continue to support the oil price.”
The falling US currency makes dollar-priced oil cheaper for foreign buyers and tends to encourage demand, leading to higher prices.
However, even at current price levels, oil has slumped from last July’s record peaks above 147 dollars per barrel because a global economic downturn has ravaged demand for energy.
Later Wednesday, the US government’s Energy Information Administration (EIA) will publish a report on American crude inventories for the week ending May 1.
The weekly report is a major event in the oil market because the United States is the world’s biggest consumer of crude, followed by number two China.
Investors are wary of any expected increase in US oil inventories, which would indicate that energy demand remains weak.
Analysts polled by Dow Jones Newswires forecast that US crude inventories will surge by 2.1 million barrels to reach a new 19-year high.
At the same time, the market is soemwhat cautious ahead of Thursday’s results of key financial “stress tests” on the struggling US banking sector.
“Market participants remain cautious ahead of the EIA inventories report today and Federal Reserve’s stress test results later this week,” said Sucden Financial Research analyst Nimit Khamar in London.
US media reported on Wednesday that Bank of America (BoA) would need to raise between 33.9 billion and 35 billion dollars in capital to maintain its financial stability.
“The need for further capital by BoA and other banks would be a hindrance to an economic recovery and could prolong the global recession, which would result in further reduction in energy demand,” warned Khamar.
Meanwhile, Anglo-Dutch oil group Shell has extended force majeure on shipments from its Nigerian Forcados oil terminal because of delay in the repair of the damaged Escravos pipeline, a spokesman said Wednesday.
“The force majeure on loading at Forcados has been extended,” Precious Okolobo told AFP, refusing to disclose when it would be lifted.
Shell has been a regular target of attacks by militants in southern Nigeria over the past three years, forcing it to shut down some facilities and several times defer contractual obligations to clients.