Oil demand provides support for rally

20 August 2009

An unexpected surge for crude, heating oil and other petrol products has provided a fillip for commodities and equity markets around the world.

A report showing an unexpected shortfall in crude oil, heating oil and gasoline inventories in the US has helped to provide further support for global economic recovery.

The figures, published by the Energy Information Administration (EIA) yesterday (August 19th), showed that total stockpiles of crude dropped by 8.4 million barrels last week, indicating a sharp recovery in demand for the product.

Meanwhile, heating oil stocks also fell 2.1 million barrels, perhaps as residential customers stock up on the fuel ahead of the seasonal increase in prices during the colder months.

Gasoline inventories also dropped for the second week, with inventories down 2.1 million barrels. The US summer driving season typically leads to a seasonal drop in inventories but the dire economic conditions in the US have kept total stocks up - and resultantly, gasoline prices lower.

Following the announcement yesterday, crude, heating oil and gasoline prices all rose on the New York Mercantile Exchange, while investors trading in stocks and shares also drew confidence from the report and provoked a bullish movement on the Nasdaq that has this morning been mimicked in equities trading in Asia.

If this upward trend is sustained, it could translate into a rise in heating oil prices.