Oil prices surge after US inventory data

[Jon Bryant]

Here comes the rise back to pre-GFC prices for petrol.  Remember the study that shwed $1.75/ltre would see a massive switch to public transport?  Here it comes.

Oil prices surge after US inventory data
December 24, 2009
7:24AM
AFP

Oil prices rose sharply on Wednesday after the United States said its crude stockpiles dropped far more than expected last week, indicating a pick-up in demand across the world's biggest consumer.

New York's main futures contract, light sweet crude for delivery in February, shot up $US1.91 ($A2.18) to $US76.31 ($A87.09) a barrel.

Brent North Sea crude for February soared 1.59 dollars to 75.05 dollars in London afternoon trading.

The US Department of Energy said crude stockpiles slumped by 4.9 million barrels to 327.5 million in the week ending December 18.

Analysts had expected a drop of only 1.1 million barrels.

The DoE added that distillate inventories slid 3.1 million barrels last week, while analyst expectations had been for a fall of 1.6 million barrels.

Data for distillates, which include heating oil, is in focus as winter starts to bite in the United States and Europe.

Crude futures had already risen on Tuesday as traders bet on improving demand after OPEC decided against changing the cartel's official crude output levels.

The Organisation of Petroleum Exporting Countries, as expected, held its crude output quotas unchanged at its meeting in Angola on Tuesday, warning of lingering weakness in the world economy.

Tuesday's meeting capped a year of recovery for oil prices, which have more than doubled since the cartel set strict quota cuts in the depths of the economic crisis a year ago.

"As expected, the OPEC meeting proved to be a non-event, but the cartel now faces serious problems trying to shore up a leaky compliance system in the weeks and months ahead," said MF Global senior commodity analyst Edward Meir.

"Indeed, many ministers expressed concern over the poor discipline shown by some members in observing quota restrictions, but it is unlikely the cartel has the political will at this stage to push through stricter compliance."

In January the cartel enforced total OPEC cuts of 4.2 million barrels a day, which helped prices recover from around 32 dollars one year ago.

Meanwhile last week, OPEC slightly upgraded its forecast for world oil demand growth next year but said usage in advanced economies would contract again.