Oil prices climbed toward $51 per barrel on Wednesday, supported by rising stock markets and after the Energy Information Administration (EIA) reported a big draw in U.S. gasoline inventories.
Investors shrugged off worse-than-expected data showing the U.S. economy contracted by 6.1 percent in the first quarter and also a bearish industry report on Tuesday showing a large build in U.S. crude stocks.
The gradual global spread of swine flu, with the first U.S. death confirmed from the H1N1 strain, also failed to dent the oil market. By 1450 GMT (10:50 a.m. EDT), U.S. crude oil for June delivery was up $1 per barrel at $50.92, having hit a high of $51.42. Earlier the contract lost as much 80 cents.
London Brent crude was up $1 as well at $50.99 a barrel.
We have had a high correlation between stock markets and oil over the last few weeks and when equities go up, so do oil and other commodities, said Frank Schallenberger, head of commodities research at Landesbank in Stuttgart.
Oil market fundamentals are very, very weak but that doesn't seem to be making much difference to the price and sentiment is being driven by other markets.
The U.S. EIA reported U.S. crude oil stocks rose 4.1 million barrels to 374.7 million in the week to April 24, compared with a forecast build of 2.1 million barrels.
The EIA report said U.S. gasoline stocks were drawn down by 4.7 million barrels to 212.6 million, much more bullish than a forecast draw of just 0.2 million barrels.
The gasoline draw was considered supportive by traders, as was a rise in stock markets on Wednesday.
U.S. stocks rose more than 2 percent on better-than-expected earnings and data that suggested business inventories will need rebuilding, even as the economy shrank more than expected in the first quarter. <.N>
REUTERS DEMAND POLL
European shares were up too, recovering losses made in the previous session on stronger-than-expected earnings news. <.EU>
Royal Dutch Shell
Speaking after the results, Shell Chief Financial Officer Peter Voser said oil prices were unlikely to rise significantly in the next 12-18 months because of economic weakness.
It will take time for the economy to recover, and hence the oil and gas price will be affected by that, Voser said.
Reuters' poll of 11 analysts, banks and industry groups forecast world oil demand would fall this year by much more than previously expected, as growth stalls in emerging powerhouses China and India and fuel consumption declines in the developed world.
Estimates see oil growth re-emerging in 2010, but analysts remain divided about how severe this year's demand contraction will be, as the global economic outlook remains clouded.
Reuters' poll showed oil use declining by an average of 1.56 million barrels per day (bpd) in 2009 to 84.10 million bpd.
(Editing by James Jukwey)