Profit taking hits oil prices

Fairfax Media

OIL PRICES: Profit takers hit the oil market after an unexpected drop in US gasoline stocks.

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Oil prices were nearly unchanged this morning after profit-taking erased earlier gains from news that gasoline stocks in the United States dropped unexpectedly.

US crude for April delivery was up 8 cents at US$81.57 per barrel at 1:14 p.m. (1814 GMT), falling from a fresh eight-week high of US$83.03 earlier.

London ICE Brent for April climbed 1 cent to US$79.92.

"Crude futures are coming down on profit-taking. We were up earlier on the big gasoline drawdown," said Mark Waggoner, president at Excel Futures in Newport Beach, California.

Gasoline stocks in the world's largest energy market showed a surprise drop of 2.9 million barrels to 229 million barrels last week, the US Energy Information Administration (EIA) reported.

And US commercial crude oil stockpiles rose 1.4 million barrels to 343 million barrels in the week to March 5 - below the 1.9 million barrels rise that analysts had been expecting.

"Today's ... data certainly has a bullish undertone with both gasoline and distillates off much more than expected," said Chris Jarvis, senior analyst at Caprock Risk Management.

Distillate stocks, which include heating oil and diesel, fell by 2.2 million barrels, far more than the 900,000 barrel draw predicted by the market.

A report showing that China's imports of crude oil in February rose to the second highest on record on a daily basis was also supportive for oil prices.

OPEC sees demand rising

Earlier, the Organisation of the Petroleum Exporting Countries (Opec) had given a mild boost to prices when it said it now thought the world would need 28.94 million barrels per day of its crude this year - an increase of 190,000 bpd from its previous assessment.

It said total world demand was likely to rise by 880,000 bpd in 2010, up from a previous estimate of 810,000 bpd.

Opec meets next week in Vienna to discuss output and analysts expect it to keep targets unchanged.

Opec members have suggested prices around US$70-80 are reasonable and on Monday, Algeria said levels in the low US$80s were fair.

The group's biggest producer, Saudi Arabia, will reduce crude supply in April to a major Asian buyer, but will keep full contracted volumes to others.

- Reuters