Oil Prices Rise as U.S. Crude Stockpiles Shrink
LONDON -- Oil prices on both sides of the Atlantic rose Wednesday, with the U.S. benchmark climbing to a 14-month high near $105 a barrel, buoyed by a sharp decline in fuel stockpiles in the United States.
But worries about a sluggish Chinese economy, underlined by bleak June trade data, kept a lid on price gains.
U.S. crude rose $1.26 to $104.79 a barrel by 0959 GMT (5:59 a.m. Eastern time), after hitting a 14-month high of $104.87. Brent edged up 32 cents to $108.13 a barrel.
"While oil demand in the U.S. appears to be reviving, current figures from China point to slowing demand dynamism there," said a Commerzbank research note.
The spread between Brent and U.S. oil narrowed 85 cents to $3.41 as the U.S. benchmark gained on data showing a drawdown in stocks.
U.S. crude stocks fell nearly 9 million barrels last week, compared with analyst expectations for a drop of 3.3 million barrels, according to the American Petroleum Institute. The U.S. Energy Information Administration is scheduled to release its inventory report later in the day.
But analysts pointed out that the drop in U.S. stockpiles, which is boosting oil prices, is being driven by the nation's summer driving season and that global demand prospects remain weak.
"The market is too high from a fundamentals point of view," said Jonathan Barratt, chief executive of Sydney-based commodity research firm Barratt's Bulletin. "It is riding on the back of expectations of a revival in U.S. demand."
China, the world's No. 2 economy, warned of a "grim" outlook for trade as it surprised markets by reporting a fall in June exports and imports when both had been expected to rise.
Its crude imports for the first half of the year fell 1.4 percent from a year ago.
"China is expected to stay below the 8 percent growth rate seen last year and might grow by 7.8 percent over 2013," said a JBC Energy market report.
"The slowdown of its economy has become a serious concern and latest trade data confirms that the country faces problems at its key export markets."
The International Monetary Fund trimmed its global growth forecast Tuesday for the fifth time since early last year, due to a slowdown in emerging economies and recession-struck Europe, which also put a lid on oil prices.
But geopolitical risks remained and investors continued to watch the situation in Egypt, helping cushion oil prices.
Egypt's interim authorities, boosted by $8 billion in Gulf aid, start work on forming a cabinet on Wednesday, a week after the elected Islamist president was ousted by the army leading to a wave of violence in which at least 90 people were killed.
Additional reporting by Jessica Jaganathan and Manash Goswami in Singapore.