Oil held near an 11-month high above $76 a barrel on Friday, with news of recovering refinery operations in the United States threatening to cap a two-week rally fuelled by an influx of fund money into the complex.
London Brent crude shed 9 cents to $76.31 a barrel by 0703 GMT, holding on to a near $1 gain the past session and still within sight of last August’s all-time high of $78.65 after gaining more than $6 since near the end of the second quarter.
U.S. crude gained 10 cents to $72.60 a barrel, playing catch up but still way below its London counterpart, amid heavy stockpiles in the U.S. Midwest and reduced North Sea crude supplies due to maintenance and pipeline problems.
While U.S. fuel stocks hover below seasonal norms and dealers remain anxious over crude exports from countries such as Nigeria and Iran, most traders now attribute much of the market’s latest rally to a fresh infusion of long-term fund money.
“There is no lack of crude supply fundamentally but funds are betting on a more bullish market, hence a great deal of buying,” said Tetsu Emori, chief commodities strategist from Astmax Futures in Tokyo.
A shift in the oil market’s structure toward backwardation — where forward contracts are cheaper than prompt contracts — may be luring some long-term investors back to oil, as they can make money by rolling their positions forward each month.
The spread between the first and second-month U.S. crude contract has narrowed to minus 29 cents from minus $1 a month ago, drawing near to backwardation for the first time in nearly two years as Cushing crude stocks fall from highs.
Separately, European crude supplies are being strained by the continued loss of Nigerian production and North Sea issues, including a gas pipeline outage that this month cut oil output from at least one group of fields, operator ConocoPhillips said.
But prices have since eased as oil major BP got ready to restart operations at its 250,000 barrels per day crude unit at its Whiting, Indiana, refinery on Thursday, with full rates expected by early next week.
This soothed fears of inadequate motor fuel stockpiles in the world’s biggest energy user, which has seen inventories rising in recent weeks on strong imports and a recovery in refinery operations after a prolonged spate of maintenance and repairs since winter put inventories well-below normal.
Traders are awaiting the International Energy Agency’s monthly view of global oil demand and stockpiles later on Friday.
The agency’s medium-term oil market report released earlier this week warned that oil demand would rise faster than expected over the next five years while production lagged.
Members of the Organization of the Petroleum Exporting Countries have said they are ready to pump more crude, but see no need to do so now, rebuffing calls from consumer nations for extra oil to lower prices.
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