Oil rebounds after stocks meet forecasts - 26 July

Crude oil prices rebounded yesterday after the latest US inventories data broadly matched market expectations. However, prices were volatile as futures trading for some energy contracts was shut on Globex, the Chicago Mercantile Exchange's electronic trading platform.

ICE September Brent retreated to $74.23 a barrel shortly after the release of the data but later recovered and closed $1.24 higher at $76.32 a barrel.

Nymex September West Texas Intermediate rose $2.32 to settle at $75.88 a barrel after the Energy Information Administration said US crude stocks fell 1.1m barrels last week, matching the consensus forecast for a 1.2m barrel decline. US petrol supplies remained the main focus of traders' attention. Gasoline stocks rose 0.8m barrels last week, double the consensus forecast.

Nymex August RBOB gasoline rose 2.7 cents to $2.0749 a gallon after falling 5.6 cents in the previous session.

"The biggest surprise was the build in gasoline and that was really a function of sharply higher gasoline imports," Tim Evans at Citigroup said.

Gasoline imports rose 3,000 barrels a day to average 10.38m b/d over the past four weeks. Several key US refineries have restarted production after recent problems, reflected in an improvement in refinery utilisation, up 0.7 percentage points to 91.7 per cent - matching forecasts.

"The outlook is that gasoline tightness will ease, especially with refineries coming back," Eric Wittenauer of AG Edwards said.

Heating oil prices eased after a larger-than-expected 1.5m barrel rise in distillate stocks last week compared with the consensus forecast for a 0.8m barrel increase. Nymex August heating oil fell 0.6 cents to $2.0250 a gallon.

Forecasts for oil prices this year and next are being revised higher by analysts. The latest monthly poll from Reuters showed Brent is expected to average $66.31 in 2007, up $3.33 from last month, and to average $65.01 in 2008, up 4.33 from last month.

The IMF warned that "the risk of an oil price spike remains a concern" after revising up global growth forecasts for 2007 and 2008.

Base metals weakened amid signs that a deterioration in risk appetite may be starting to bite in the commodities complex. "The market is in reality check mode" said one dealer who questioned whether supply and demand fundamentals were as tight as available inventories suggested or if hedge funds were again trying to squeeze copper and zinc prices higher.

Copper fell 2.2 per cent to $7,780 a tonne in spite of a fall of 2,100 tonnes in LME stocks. Copper has failed to maintain a hold above the key $8,000 level with supply concerns diminishing as the threat of strike action in Chile has receded.

Zinc lost 2.5 per cent to $3,640 a tonne while nickel continued its weak run, down 2.5 per cent to $31,400 a tonne,

Lead tumbled 3.8 per cent to $3,175 a tonne after hitting a record $3,500 earlier this week.

Gold fell 1.5 per cent to $672.75 a troy ounce, under pressure from a rebound in the dollar.

Germany 's wheat harvest is expected to be 10 to 15 per cent lower than last year's 22.3m tonnes, according to the farmers association BDV. November milling wheat prices traded at €203.5 a tonne, consolidating after yesterday's break above the €200 level.