Oil futures rose for a second day on Wednesday, as US Federal Reserve Chairman Ben Bernanke signalled more stimulus coming if the economy weakens, and US crude inventories fell more than expected last week. The dollar fell sharply, making oil and other commodities more attractive, after Bernanke said the US central bank was ready to ease monetary policy further if the economy slows further and inflation moves lower.
"Bernanke's comments plus the EIA's crude stock draw pulled up crude futures," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut. In London, ICE Brent crude for August delivery settled at $118.79 a barrel, rising $1.03. US August crude closed at $98.05 a barrel, paring gains to 62 cents, on a bout of profit-taking after hitting a session high of $99.21.
Brent's premium against US crude widened to $22.74 after closing at $20.32 on Tuesday. Prices rose back up after earlier losses on worries about eurozone debt and despite supportive data from China and a forecast of strong demand growth from the Paris-based International Energy Agency. The US Energy Information Administration said domestic crude inventories fell 3.1 million barrels last week, far more than the forecast for a 1.8 million drawdown in a Reuters poll and extending a supply decline to six straight weeks.
The US dollar was down 0.78 percent against a basket of currencies in late trading. Wall Street rallied after a three-day sell-off as investors cheered Bernanke's comments before a congressional panel while an array of commodities gained after the dollar's hefty drop. The 19-commodity Reuters-Jefferies CRB index jumped 1.5 percent as oil and other commodities rose.
In New York, US gasoline futures climbed to a two-month high of $3.1750 a gallon, before settling at $3.1516, gaining 5.34 cents, or 1.7 percent, pacing the energy markets. Gasoline soared after US EIA's data showed an 800,000 barrel stocks drawdown, contrary to forecasts for a small 200,000 barrel rise. "Prompt barrels on the New York Harbor have remained tight, and that is what's pushing gasoline up, not necessarily demand," said Tom Knight, trader at petroleum marketers Truman Arnold in Texarkana, Texas.
Eurozone plans for a leaders' summit on a second Greek rescue were thrown into doubt by Germany on Wednesday, raising fears markets may exploit the policy vacuum with a new onslaught on the bloc's high debtors. The 28-nation IEA predicted global oil demand would rise next year to a 91 million barrels per day (bpd), outpacing a more conservative prediction by Opec. Since falling to four-month lows after the IEA announced on June 23 a co-ordinated move among its members to release 60 million barrels of emergency oil stocks, US crude has bounced back nearly 8 percent while Brent crude has rebounded almost 11 percent.
China's second-quarter gross domestic product rose 9.5 percent from a year earlier, exceeding economists' forecasts for 9.4 percent growth. The country's implied oil demand in June rose 1.1 percent from a year earlier, however, the slowest growth rate since April 2009.
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