LONDON (Reuters) -Oil traded near $69 a barrel on Wednesday, in striking distance of its record, as investors balanced bumper U.S. crude stocks against a larger-than-expected draw in gasoline and distillate supplies.
At 1527 GMT U.S. crude was 8 cents down at $68.90 a barrel and London Brent crude traded 13 cents higher at $69.50.
The U.S. Energy Information Administration reported a decline in domestic gasoline and distillate stocks, stoking concerns that supplies would be tight ahead of the peak summer driving season.
“We have a distillate draw that’s way beyond what anybody thought,” said Addison Armstrong, manager for exchange traded markets at U.S.-based TFS Energy.
“The U.S. trucking industry needs the diesel component of distillates to support huge demand, and this is going to be a problem this summer.”
U.S. distillate stocks slipped 4.2 million barrels, surpassing expectations for a 1.4 million barrel decline.
Domestic gasoline supplies fell for the sixth consecutive week, declining 3.9 million barrels, the Energy Information Administration said.
But brimming U.S. crude stocks, which rose 3.2 million barrels, were seen limiting bullish sentiment. Supplies in the U.S. Gulf Coast reached their highest levels on record, the EIA said.
GLOBAL SUPPLY WOES
Global supply concerns pushed prices as high as $69.60 earlier in the session, nearly a dollar away from record levels set last year following hurricane damage in the United States.
The International Energy Agency said hard-pressed OPEC would have to pump more to fill a gap from Russia and other suppliers.
Most OPEC members are already producing close to the limit and the group has missed its 28 million barrels per day output target every month this year, mainly because rebels have shut a quarter of Nigeria’s output. The IEA pitched 2006 demand for OPEC oil even higher — at 29.4 million bpd.
The market is also sensitive to every headline about OPEC member Iran’s nuclear program. The world’s fourth biggest oil exporter is steering a collision course with the United Nations.
The European Union and Russia added their voices to U.S. condemnation of Iran’s announcement on Tuesday that it had enriched uranium for the first time.
“The ongoing Nigerian output losses and continued concern over Iran are unlikely to be resolved in the near future,” the IEA said in its monthly report.
“For now, actual and potential supply disruptions and falling U.S. product stock levels are driving the oil price rally.”
Oil is riding a rally that has seen it jump about $50 a barrel since the start of 2002, with investors driving commodities toward record highs and the global economy and growing demand so far proving resilient to soaring fuel costs.