Oil tops $78 a barrel
Oil climbed above $78 on Thursday after strong Chinese growth data offset bearish sentiment following a World Bank outlook highlighting risks that the global economic recovery may run out of steam.
China’s annual gross domestic product growth accelerated in the fourth quarter to 10.7 percent from a revised 9.1 percent in the third, the National Bureau of Statistics (NBS) said on Thursday.
U.S. crude oil for March delivery, the new front-month contract after February expired on Wednesday, rose 30 cents to $78.04 a barrel by 0617 GMT (1:17 a.m. EST). Prices hit their lowest this year at $76.76 on Tuesday. London Brent crude rose 11 cents to $76.43 on Thursday.
“For all of this year we are going to have a big focus on China because it will be the main driver of demand,” said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
“Because it is a command-style economy, things can change quickly. What was bullish could turn bearish if China puts on the brakes.”
World growth could falter as governments pull back some of the extraordinary liquidity they pumped into markets, the World Bank said on Wednesday.
A 4 trillion yuan ($585 billion) fiscal stimulus package was complemented by an unprecedented surge in lending by China’s predominantly state-owned banks, ensuring that the nation was the first major economy to recover decisively from the credit crunch.
But the government has signaled it will tighten credit this year, calling on banks to increase reserves and curb lending.
Industrial production increased 18.5 percent last month compared to expectations for a 20 percent jump.
The World Bank said in its annual Global Economic Prospects report for 2010 that the subdued recovery in the world economy, led by China and India, poses special risks for developing countries that might face stiffer borrowing costs, reduced credit and capital flows.
On Chinese oil data, the country’s December crude runs, or the amount of crude processed by refiners, jumped 24.8 percent from a year earlier to a record 8.15 million barrels per day. For the whole year of 2009, runs posted an increase of 7.9 percent.
Soaring output from refineries has turned China into a sporadic oil-products exporter, boosting requirements of imported crude.
U.S. crude reached a 15-month high of $83.95 a barrel on January 11. “If the Chinese economy just goes boom, then we could go another step higher,” Nunan said. “For now, we still have too much inventory around and too much spare capacity.”
Prices are 47 percent below their July 2008 records near $150, but have almost doubled from lows near $32 reached by the end of that year.
“Prices dipped too low and recovered just from the fact that the world economy did not go into a full depression,” Nunan said.
“Now prices have already built in economic growth, but if we don’t see that, we are going to get a lot of turbulence in the oil market.”
In the U.S., an unexpected drop in crude stockpiles shown by an industry report had little impact on prices. The American Petroleum Institute (API) said inventories fell 1.8 million barrels last week against forecasts for a 2.4 million gain.
The nation’s distillate inventories, which include heating and diesel, dropped a larger-than-expected 3.4 million barrels. Supplies were forecast to have slid by 100,000 barrels, a Reuters survey showed.
Gasoline stocks rose 667,000 barrels, less than a forecast gain of 1.7 million barrels.
Inventory data from the government’s Energy Information Administration (EIA) will be published on Thursday at 1600 GMT. Both weekly reports were delayed by a day because of a U.S. holiday on Monday.