LONDON--Oil prices rose Tuesday ahead of the latest U.S. oil
inventory data, but some analysts cautioned the recent rally might
prove unsustainable.
Brent crude, the global oil benchmark, rose 0.5% to $66.75 a
barrel on London's ICE Futures exchange after falling in earlier
trade.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in June recently traded up 0.7% at $59.33 a
barrel.
Oil futures posted their largest monthly gain in almost six
years in April, as the number of oil drilling rigs in the U.S.--a
proxy for the activity in the industry--has continued to
decline.
Crude inventories at the key U.S. storage hub of Cushing, Okla.,
fell last week for the first time in 20 weeks. Total oil
inventories in the country, however, are still at an 80-year
high.
The American Petroleum Institute, an industry group, will
release its latest U.S. oil inventory data later Tuesday. The
government estimate for inventories and oil production from the
Energy Information Administration will follow Wednesday.
"I am hoping to see a drop in the U.S. crude oil production.
That should push crude oil prices higher," said Daniel Ang, analyst
at Phillip Futures.
Brent prices are up more than 40% since their lows in January,
but some analysts cautioned the global oversupply of oil shows
little signs of dissipating.
"The run-up in prices in our view conceals a weak underlying
fundamental balance," analysts at Bank of America Merrill Lynch
said. The bank sees U.S. crude prices double dipping to $50 a
barrel as refinery maintenance kicks in again in September before
recovering to $57 a barrel by year-end.
According to David Hufton at London brokerage PVM, while some
deep sea and Arctic oil exploration isn't feasible at the current
prices, the shale oil industry can continue to grow at $60 a barrel
as operation costs plummet.
"The rally from this year's low is impressive, but it contains
the seeds of its own destruction in potentially restimulating
supply and curtailing demand," Mr. Hufton said.
Nymex reformulated gasoline blendstock for June--the benchmark
gasoline contract--rose 0.4% to $2.042 a gallon, while ICE gasoil
for May changed hands at $606.75 a metric ton, up $2.75 from
Monday's settlement.
Biman Mukherji contributed to this article.
Write to Georgi Kantchev at georgi.kantchev@wsj.com
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