Oil spikes above $ 81, Mexico storm worries brew

Written by:
Subscribe to Oneindia News

SINGAPORE, Sept 27 (Reuters) U.S. oil rallied 1 percent on Thursday, extending gains despite a lack of fresh news as concerns that a brewing storm could impact Mexican oil production offset an unexpected rise in U.S. crude oil inventories.

U.S. crude for November delivery jumped 92 cents to .22 a barrel by 0522 GMT, after gaining 77 cents on Wednesday. The November contract captured the strongest gains, with second-month December up only 60 cents.

London Brent crude rose 60 cents to .03 a barrel. Analysts and traders in Asia were hard-pressed to explain the unusually sharp gains, but said they did not appear related to fresh news. Trading volume was higher than usual for Asian hours, but still very thin compared to the European and U.S. days.

''Adding another dollar this morning is very puzzling,'' said a senior trader at an investment bank, adding that the gains could quickly evaporate once European activity picks up.

Prices ended volatile trade higher on Wednesday after traders shifted their focus from bearish inventory data to a storm a tropical depression that formed on Tuesday in the southwest Gulf of Mexico, expected to become a tropical storm on Thursday.

Although forecasts showed the storm moving slowly westward away from Mexico's main offshore platforms in the Bay of Campeche, traders are sensitive to rough weather after a tropical depression briefly shut down nearly two-thirds of U.S. Gulf oil production last week.

''Weather is always a factor at this time of year, the depression is probably supporting prices as it has the potential to disrupt supply,'' said David Moore, commodities strategist at Commonwealth Bank.

Weather worries took precedence over a government report released on Wednesday showing U.S. crude stocks rose last week by 1.8 million barrels, despite expectations of a draw. S] ''The increase in inventories was unexpected, but more surprising is that oil bounced back,'' said Moore.

U.S. crude oil stocks rose last week on an increase in imports and as refinery operations eased to their slowest pace since March, but some analysts expect them to resume falling next week, partly due to Gulf of Mexico disruption.

Inventories of gasoline increased by 600,000 barrels, while distillate stocks jumped by 1.6 million barrels. Oil has been under pressure since last week's peak of .90, due in part to concerns over economic growth amid a U.S. credit crunch, alongside profit taking.


Please Wait while comments are loading...