LONDON (Reuters) – Oil briefly rose above $108 a barrel on Wednesday, boosted by expectations of a sharp fall U.S. fuel stocks due partly to disruptions from Hurricane Ike.
Concerns over U.S. supplies offset uncertainty about the success of the U.S. government’s $700 billion plan to rescue the finance industry.
U.S. light crude for November delivery was $1.00 up at $107.61 a barrel by 5:19 a.m. EDT, after settling down $2.76 at $106.61 on Tuesday.
London Brent crude was 72 cents up at $$103.80 a barrel.
“There could be some improved sentiment but I suspect people are largely being cautious ahead of the release of the EIA data and don’t want to be caught short,” said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
Weekly U.S. government inventory data due later on Wednesday are expected to show that crude stocks fell by 2 million barrels, the fifth consecutive week of declines, due to disruptions caused by Ike, according to a Reuters poll.
Distillate stocks are forecast to have fallen by 1.5 million barrels. Gasoline stocks are expected to have dropped by 4 million barrels, the ninth straight week of declines, as Hurricane Ike forced the shut-down of Gulf Coast refineries.
Energy firms continued to work on restarting production, refineries and pipelines after Hurricane Ike battered U.S. oil infrastructure. Six oil refineries in Texas remained shut on Tuesday due to the hurricane.
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Oil had its biggest ever one-day gain of nearly $16 a barrel on Monday, during the expiry of the October U.S. crude oil contract. The U.S. Commodity Futures Trading Commission is reviewing the price jump to ensure trading was valid.
But prices have fallen back from a record peak of $147.27 a barrel on July 11, pressured partly by falls in demand in the United States, the world’s top energy consumer.
Fears the crisis in the financial sector could tip the global economy into recession has also weighed on the market.
These worries have not gone away despite the U.S. government’s $700 billion bailout plan.
“Key emerging markets for commodities like China are also seeing strains,” said Harry Tchilinguirian, analyst at BNP Paribas.
Growth in oil demand from China, the world’s second biggest energy consumer, has played a big part in oil’s six year rally.
“China faces a collapse in equity and property markets, which adds further headwinds to its economy on top of slowing demand for its manufactured products by advanced economies,” Tchilinguirian said.