By Grant Smith
(Bloomberg) -- Crude oil rose for the first time in three days before a report forecast to show that U.S. crude inventories declined a second week.
“The U.S. economy is still on a track to recovery,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “The market is feeling upbeat about signs that demand for fuel products in the U.S. is quite healthy. We should see crude inventories decline between 500,000 and 1 million barrels.”
Crude for July delivery climbed as much as 74 cents to $72.18 a barrel on the New York Mercantile Exchange, and was at $71.79 at 1:24 p.m. London time. Brent crude for July delivery traded at $72.14 a barrel, up 2 cents, on the ICE Futures Europe exchange in London.
Societe Generale SA cut its 2011 forecasts for West Texas Intermediate and Brent crude because of higher-than-expected oil supplies and weak growth in consumption. Crude oil in New York will average $92.30 a barrel next year, compared with a previous forecast of $101 a barrel, Michael Wittner, head of oil research, said in an e-mailed report dated yesterday.
The dollar weakened against the euro, increasing the appeal of commodities, trading at $1.1948 to the European currency compared with $1.1923 in New York yesterday.
Rising Risk Aversion
“Sentiment is being driven by rising risk aversion, weak equity markets and a rising dollar,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna. “That’s not a great cocktail for raising oil prices. The correlation to equities is so strong that if they rebound, I’m convinced oil will follow fast.”.
The Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington.
U.S. refineries probably operated at 87.5 percent of capacity last week, unchanged from the previous week, according to the median of analyst responses.
Analysts were split over whether gasoline inventories rose or dropped last week. Supplies were probably unchanged at 219 million barrels. Five analysts anticipated a gain and five forecast that supplies slipped.
The industry-funded American Petroleum Institute will publish its weekly report on supply and demand levels today in Washington at 4:30 p.m. local time.
Kuwait’s Oil Minister Ahmad Al-Sabah said that prices will probably average $70 for the rest of this year and that he considers current levels “acceptable.” Al-Sabah spoke to reporters in Kuwait’s parliament today.
The Organization of Petroleum Exporting Countries will release its monthly market report tomorrow. The Paris-based International Energy Agency publishes its outlook the next day.
--Editors: John Buckley, Raj Rajendran
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