The price of oil pushed above $105 a barrel Wednesday after a report indicated that U.S. crude stockpiles fell by far more than expected last week, in a potential sign of growing demand in the world's largest economy.
By early afternoon in Europe, benchmark crude for August delivery was up $1.61 to $105.14 a barrel in electronic trading on the New York Mercantile Exchange. Oil was trading at its highest price since early May 2012.
The advance came after figures from the American Petroleum Institute, an industry group, reportedly found that U.S. crude inventories last week fell by 9 million barrels, way more than the 3.8 million expected in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
"Last week saw an unexpectedly sharp reduction in U.S. crude oil stocks," analysts at Commerzbank in Frankfurt said. "According to the API, they declined by 9 million barrels, destocking on a similarly high scale having already been recorded a week earlier. Despite higher levels of crude oil processing, gasoline stocks dropped by 3.5 million barrels, which suggests that demand picked up again in the run-up to the Independence Day weekend."
The Energy Department releases its weekly report on U.S. inventories of crude oil and refined fuels -- the market benchmark -- later Wednesday.
A drop in supplies would suggest stronger demand and underline the signs of economic recovery shown in last week's stronger-than-expected U.S. hiring report.
A report from The Organization of Petroleum Exporting Countries forecasting rising global demand in 2014 also helped boost prices. The Vienna-based group said it expected additional global demand to reach 1 million barrels a day next year, compared to an annual increase of around 800,000 barrels a day in 2013.
"Next year's forecast for world oil demand is subject to uncertainties linked closely to the pace of the recovery in some major economies, particularly the U.S. and eurozone, and GDP growth in China," OPEC said in its monthly report on oil markets. "In addition, oil demand growth in 2014 could be capped by the implementation of policies targeting energy efficiency in transportation, as well as subsidies in some countries."
At the same time, OPEC said demand for crude from its members would be slightly lower in 2014 than now, dropping to an average of 29.6 million barrels a day in 2014 from 29.9 million barrels a day this year. The difference is expected to be made up by supplies non-OPEC producers.
Oil prices were also supported by a weaker dollar -- which makes crude cheaper for traders using other currencies -- and the political crisis in Egypt. While Egypt is not an oil producer, it controls the Suez Canal, a critical channel for oil and gas shipments from the Middle East.
Brent crude, which is used to set prices for oil used by many U.S. refineries, was up 49 cents to $108.30 on the ICE Exchange in London.
In other energy futures trading on the New York Mercantile Exchange:
- Wholesale gasoline added 3.9 cents to $2.965 a gallon.
- Natural gas climbed 5.7 cents to $3.714 per 1,000 cubic feet.
- Heating oil was up 0.7 cent at $2.9927 a gallon.