LONDON (Reuters) – Oil climbed to $77 and U.S. crude hit its highest in almost a year on Thursday on increasing demand from refiners in the world’s top consumer.
At one point the rally lifted U.S. oil above London Brent for the first time since February, based on closing prices.
Analysts pointed to data released on Wednesday that showed U.S. crude stocks fell for a third consecutive week.
“With imports staying around the current 10.4 million barrels per day and refinery runs expected to increase 150,000 to 250,000 bpd over the next two weeks, potentially larger draws for crude may be on the horizon,” Lehman Brothers analysts said.
At 1035 GMT U.S. crude was up $1.01 at $76.89 a barrel, off a session peak of $77.24, the highest since August 9, 2006. It had surged $2.32 on Wednesday.
London Brent crude was up 62 cents to $76.94.
“The draw that we saw in some of the crude stocks are demonstrating that the refining position in the United States is probably the best it has been for about three months in terms of the operating capacity,” said Rob Laughlin at Man Financial.
BNP Paribas said oil output curbs by OPEC would ensure a continuing decline in U.S. crude stocks through the third quarter.
“As we move deeper into the third quarter, reductions in OPEC supplies initiated in late 2006 will help to reduce U.S. surplus crude supplies.”
“If the current OPEC output trend continues, the cartel will remove on average in excess of one million bpd of supply versus last year in the third quarter, supporting a stronger than seasonal draw in U.S. inventories (albeit from elevated levels).”
Other analysts pointed to the emergency shutdown of most of Exxon Mobil Corp.’s 326,000 bpd Fawley refinery, which accounts for almost a fifth of Britain’s refining capacity, as a factor behind Brent’s lagging performance.
While bullish for gasoline and heating oil, the closure could be bearish for North Sea crude if the plant stops processing for a prolonged period.
Barclays Capital technical analysts, who study charts to determine future price direction, said $76.40 was a key level for U.S. oil, the high of the September contract.
“We are keeping a close eye on the $76.40, WTI high, as a close above would confirm a resumption of the larger uptrend, increasing the odds that prices will test the July 2006, all-time highs at 78.40,” they said.