Oil prices rise in ‘temporary reprieve’

Brent crude rose above $70 a barrel on Thursday, gaining nearly 1 per cent along with US futures as a fall in crude stockpiles in the United States supported prices.

US crude stocks fell more than expected last week as refineries hiked output, data from the Energy Information Administration (EIA) showed on Wednesday. Brent added 48 cents to $70.40 a barrel by 0712 GMT. The contract settled below $70 on Wednesday after a report suggested Saudi Arabia expected still lower prices for oil.

US crude futures rose 64 cents to $68.02 a barrel, after a 50-cent gain in the previous session. Many analysts expect prices to head still lower after recent steep falls as US shale oil output growth stays strong and OPEC has decided not to cut supply.

Markets could be going through a temporary reprieve after "bearish exhaustion", said Stephen Schork, editor of Pennsylvania-based The Schork Report. "By most estimates, the economics on oil production are below breakeven," Schork said, referring to North American capital expenditure and fiscal budgets of OPEC countries.

However, he said it was too early to say how low oil prices could fall. Brent's failure to break resistance at $71.42 could encourage new selling, Schork said. Venezuela's President Nicolas Maduro said on Wednesday that prices could fall further, while the Wall Street Journal, citing people familiar with the situation, reported that Saudi Arabia believed crude prices could stabilise at around $60 a barrel.

Exxon Mobil Corp chief executive officer Rex Tillerson said he was confident of the company's ability to withstand the price drop as it has tested investment decisions based on $40-a-barrel oil.

Investors are turning their focus to US data for clues on the strength of demand in the world’s largest economy and oil consumer.

Economic resilience in the United States has supported global stocks with the Dow and S&P scoring record highs overnight. In the United States, crude inventories fell by 3.7 million barrels last week, compared with analysts’ expectations for an increase of 1.3 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 694,000 barrels, the EIA said. This helped narrow the spread between Brent and West Texas Intermediate to less than $3 a barrel on Wednesday, the weakest in seven weeks.

Reuters