IPE Brent edges towards $74 ahead of expected US crude stock draw

IPE Brent edges towards $74 ahead of expected US crude stock draw

London (Platts)--12Jul2006

IPE Brent futures firmed slightly on Wednesday ahead of the release of US
inventory data expected to reveal a large draw in crude and the reported
failure of the latest round of talks between the Iranian government and the EU
to resolve the ongoing uranium enrichment crisis.
At 1115 London time (1015 GMT) August Brent was trading 15 cents higher
from its overnight settle at $73.82/barrel.
"There has been a bit of an uptick this morning ahead of the stats. If
the stats provide some support with a draw in crude then I can see this market
testing highs by the end of this week once again," one broker said.
US oil inventory data due to be released Wednesday by the US Energy
Information Administration and American Petroleum Institute are expected to
show a 1.9 million barrel draw in commercial crude stocks, according to
analysts surveyed by Platts Tuesday. Analysts were projecting a build in
gasoline stocks of 1.5 million barrels.
"The normal post-Fourth of July dip in gasoline deliveries plus the
effects of Europe's renewed heavy gasoline export programs (reported to be
850,000 b/d for the first ten days of July) should give gasoline an even
bigger build in Wednesday's statistics," Deborah White, energy analyst at
Societe Generale, said in a report. "It scarcely seems to matter; strong
demand rules the roost."
Gasoline demand posted its third highest level ever in last week's EIA
report at 9.645 million b/d. Gasoline demand growth on a four-week moving
average was 1.4% above year-ago levels.

DISAPPOINTMENT WITH IRAN
There was negative sentiment surrounding the Iran uranium talks after US
Secretary of State Condoleezza Rice on Wednesday described Iran's response to
a Western offer aimed at resolving the standoff over its nuclear program as
"disappointing and incomplete."
Despite high oil prices, US gasoline demand, the season driver for the
summer market, is holding steady, according to the latest PFC Energy
Commitment of Traders Report. "US gasoline demand is holding steady with last
year and oil demand elsewhere is firming especially in the Far East. As the
world's refining system is stretched tightly, few traders want to be caught
short of any oil commodity, even crude oil which remains in plentiful supply."
Rising oil demand was also a feature of the latest International Energy
Agency report released Wednesday. World oil demand will rise by 1.9% or 1.6
million b/d to 86.4 million b/d in 2007, the IEA said.
Demand is then forecast to rise to 88 million b/d in 2008, 89.8 million
b/d in 2009, 91.7 million b/d in 2010 and 93.7 million b/d in 2011.
Despite the projected increases in world oil demand, the IEA sees the
call on OPEC crude falling from 28.8 million b/d in 2006 to 28.4 million b/d
in 2007, and to 28.2 million b/d in 2008, before rising to 28.4 million b/d in
2009, 29.2 million b/d in 2010 and 30.2 million b/d in 2011.
Supply from non-OPEC producers is projected to grow from 51.3 million b/d
in 2006 to 53 million b/d in 2007, 54.4 million b/d in 2008, 55.3 million b/d
in 2009, 56 million b/d in 2010 and 56.7 million b/d in 2011.
The IEA, launching its first Medium-Term Oil Market Report, said its
analysis "suggests that forward prices are too high and that the clear trend
towards an improved supply picture for crude and gasoline over the next five
years should help moderate crude forward prices."
But, it said, "by 2011 capacity growth is already seen slowing and demand
will have strengthened," suggesting that any lull in price pressures would be
temporary without continued investment and continued momentum to conserve
energy.
--Jonathan Davies, jonathan_davies@platts.com

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