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Royal Dutch Shell Plc .com: Oil Above $70 on Signs of Resilient US Demand

 
THE NEW YORK TIMES: By REUTERS
Published: June 22, 2006
Filed at 0:51 a.m. ET

SINGAPORE (Reuters) – Oil held firm above $70 on Thursday after a smaller-than-expected rise in U.S. gasoline stocks reignited talk of resilient oil demand in the world’s top consumer, moving inflation worries to the backburner.

U.S. light crude (CLc1) for August was up 23 cents at $70.56 a barrel by 0406 GMT, having gained 99 cents on Wednesday, its first rise in three sessions amid a gasoline-led rally.

Gasoline (HUc1) jumped 3 percent on Wednesday after U.S. government data showed a 300,000-barrel increase in gasoline stocks, despite an increase in refinery utilization, against earlier expectations of a bigger 1.2 million barrel rise.

July gasoline was up 0.50 cent at $2.0710 by 0407 GMT.

“Over $3 a gallon for gasoline in the U.S. is not really making any damage in demand. This is a strong sign,” said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures.

U.S. gasoline demand over the past four weeks stood at 9.41 million barrels per day, up 0.9 percent from a year ago.

“In all, the rumors of the demise of US demand seem to be premature,” Barclays Capital said in their weekly report.

The market shrugged off a 1.4 million barrel rise that pushed U.S. crude oil stocks to their highest in eight years.

“The oil complex is product-driven, led by gasoline and middle-distillate demand. We continue to believe that global demand growth is solid, and today’s stats reinforce that view for the U.S.,” French bank Caylon said in a report.

The data partly quelled concerns that tighter U.S. monetary policy and moves in China to curb growth could dampen demand in the world’s two largest oil customers, although figures from other big consumers have painted a fuzzy picture.

In Japan, the world’s third largest oil user, crude imports in May plunged by more than a quarter versus April as refiners shut down for heavy spring maintenance, while supplies were down only 2.7 percent from a year ago, government data showed.

But South Korea’s domestic oil product demand rose during that same month, the first sign of growth in Asia’s fourth-largest consumer this year.IRAN TENSIONS BACK THE FRONT

The demand-supply equation remains fragile and prices have held in a $68-73 band for more than six weeks, resisting much sharper falls in other commodity markets as oil-specific geopolitical concerns limit the impulse to sell.

Tensions over Iran were rekindled on Wednesday when U.S president George W. Bush said Iran was taking too long to respond to proposals to halt its nuclear enrichment program.

Bush’s comment came after Iranian president Mahmoud Ahmadinejad said Iran would respond by August 22 to a U.S.-backed package of incentives offered early this month.

Iran, the fourth biggest oil exporter, was given an unofficial mid-July deadline to reply to the offer.

In Nigeria, Shell restarted 50,000 barrels a day of crude output after fixing a leak at a crude oil pipeline that was shut down in early June. Some 450,000 barrels a day remain shut.

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