Crude Higher As OPEC Raises Demand; Eyes On Inventories

In its monthly report on Wednesday, OPEC said that global oil consumption will expand by 800,000 barrels per day this year to 89.7 million a day, amid “some signs of recovery in the global economy and colder weather at the start of this year”.

This is 80,000 bpd more than the previous expectations, while China will account for 400,000 barrels a day of this year’s growth. OPEC must provide an average of 29.8 million barrels a day in 2013 or 100,000 a day more than estimates a month ago.

The U.S. Energy Information Administration (EIA) followed suit and increased its forecast for demand growth in 2013 by 110,000 bpd to 1.05 million bpd, with global demand reaching this year to 90.2 million bpd, adding to evidence that global demand is rising.

As a result, crude rose yesterday to the highest at $97.77, and as of this writing crude is trading near the highest level in over a week around $97.60 a barrel, with the highest at $97.62 and the lowest at $97.48. On the intraday crude finds support at $97.00 then at $96.50 and resistance at $98.00 then at $98.50.

Adding to the upside pressures on crude was the first drop in the U.S. crude stockpiles this year. The American Petroleum Institute data showed stockpiles fell to 369.5 million barrels last week, gasoline inventories fell 810,000 barrels and distillates fell 1.1 million barrels.

Some investors are kept on the sideline as volumes continued to be lower than usual in Asia this morning, since markets in China, Taiwan and Hong Kong remained closed for a third day this week for theLunar New Year.

Investors may also be reluctant to take big positions today as markets await the EIA report, the U.S. retail sales, eurozone’s industrial production as well as the the G20 and central bankers meeting this week amid increased tensions over the euro`s strength and the yen`s weakness.

“The faster demand forecasts are supporting oil prices, but the concerns of a currency war are weighing on the markets,” said Ker Chung Yang from Philips Futures in Singapore.

Moreover, while U.S. retail sales are expected to rise at a slower pace in January than the previous month. Crude inventories in the world’s biggest oil consumer are expected to rise by 2.2 million barrels last according to the EIA report.

Easing tensions over Iran may also keep oil prices subdued on Wednesday, after Iran admitted it was converting some of higher-grade enriched uranium into reactor fuel, which is one way for Iran to slow the growth in its stockpile.

Meanwhile, the tensions over North Korea’s nuclear test continue. The incident dragged criticism from all over the world. U.S. President Barack Obama said this is a highly provocative act that undermines regional stability.

Brent is trading as of this writing around the $118.57 after falling 0.08%, natural gas is trading at $3.233 per 1,000 cubic feet after rising 0.09%, gasoline is trading at $3.0489 a gallon after falling 0.05% and heating oil is trading at 3.238 after rising 0.06%.