Oil climbed toward $75 a barrel today, extending the previous session's gain of 1%, buoyed by an upbeat oil demand growth forecast by the US Energy Information Administration (EIA) and hopes of a rescue plan for Greece. The EIA yesterday forecast world oil demand to rise 1.2 million barrels per day in 2010 from a year ago, up by 120,000 barrels per day from a previous forecast. It also expects oil prices to average $81 a barrel in the second half of the year, up 9% from current levels.
Euro zone countries held intensive talks yesterday on a possible rescue for debt-laden Greece, with investors increasingly anticipating that other European governments, led by Germany and France, would help Athens avoid default. EU leaders will hold a summit on the economy today. US crude for March delivery jumped 34 cents to $74.83 a barrel by 0312 GMT, after settling 77 cents higher at $74.52 a barrel yesterday, Reuters reported. London Brent crude rose 24 cents to $72.78. "Expectations of a Greek bailout, which would significantly reduce systemic risk in global financial markets, have helped to boost oil prices," said Serene Lim, commodities analyst with ANZ Bank in Singapore. "Sentiment is definitely more optimistic today.»
A bailout of Greece could alleviate jitters about the fiscal health of European economies, increasing demand for riskier assets like oil. Further lifting oil prices were signs of higher heating fuel demand as a second blizzard in a week buried the US Northeast, breaking a century-old snowfall record in the nation's capital yesterday, leaving thousands without power and creating a multimillion-dollar mess. US heating demand this week is seen 11.5% above normal, weather services said.
The euro steadied today, having resumed its slide in the previous session, with investors reluctant to take positions ahead of the EU summit. Japan's Nikkei average rose 0.3% yesterday, with blue-chip shares that had been sold off on concerns about fiscal stability in Europe regaining ground with news of potential aid for Greece. Traders will scour US weekly inventory data from the EIA due tomorrow for further clues on the rate of demand recovery in the world's largest oil user.
The EIA said on Tuesday its weekly data, normally released on Wednesdays, will be delayed until Friday due to the snowstorm blanketing the US capital. A report from the American Petroleum Institute (API) on Tuesday showed crude inventories jumped by 7.2 million barrels to 337.6 million last week, against expectations of a rise of 1.5 million, and despite a drop in crude imports and weekly crude runs. Gasoline inventories also rose more than expected, climbing 1.6 million barrels to 228.8 million, exceeding analyst estimates of a 500,000-barrel build, Reuters reported.
