Crude futures climbed above US$51 a barrel yesterday after the US government reported that the nation's crude inventories had fallen, surprising traders who had expected another rise.
On the New York Mercantile Exchange, light, sweet crude for July delivery were up US$0.12 at US$51.10 at midday in Singapore.
Heating oil prices fell marginally to US$1.4270 a gallon (3.8 liters), while unleaded gas rose to US$1.4523 a gallon.
The US Energy Information Administration's midweek petroleum data showed US commercial crude oil inventories fell 1.6 million barrels to 332.4 million barrels in the week ending May 20 from the previous week.
Traders were expecting another increase after growing accustomed to consecutive gains in recent months. Wednesday's report was just the second decline in 15 weeks.
Still, oil analyst Victor Shum of Texas-headquartered Purvin & Gertz in Singapore said the rally was a "short-term reaction" to the results of the US report, adding that traders should take note of the healthy increase in crude stocks in the past months.
Inventories are 32.4 million barrels higher than year-ago levels.
"In the short term, there's a possibility that by the beginning of next week, prices will fall after all the hoopla about Memorial Day is over," Shum said.
He said the drop in crude stocks is to be expected as the US gears up for the start of the summer driving season, starting with this weekend's Memorial Day holiday.
Meanwhile, US gasoline inventories rose 600,000 barrels to 215.4 million barrels, up from 203.6 million a year ago. Most analysts had predicted a decline in gasoline stocks.
Distillates rose 1.9 million barrels to 105.7 million, up from 104.7 million last year but still in the lower half of the average range for this time of year. High sulfur distillates, or heating oil, comprised most of that increase, rising 1.6 million barrels to 39.7 million barrels, up from 35.9 million a year ago.
Crude prices are about US$7 lower than their all-time high of US$58.28 set on April 4.
Comments from key members of OPEC about possibly reducing production have also lent some support to prices. On Wednesday, Iranian Oil Minister Bijan Zanganeh said the option of cutting output is "something that needs to be discussed."
Last week, Venezuela's oil minister said Venezuela, along with other members of the OPEC, would have to evaluate the proposal to decrease oil output at a meeting next month.
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