Oil slips on Euro debt concern

SINGAPORE: Oil slipped on Friday from its highest closing price in three weeks as investors remained skeptical that rising US demand and falling stockpiles would prevail over concern Europe’s debt crisis may deepen.

US oil demand jumped 8% in the past four weeks from a year ago, government statistics showed on Thursday, led by a 17% surge in distillates as transport and industry lifted diesel use. Crude and gasoline stocks fell last week.

Traders were awaiting Friday’s US non-farm payrolls, expected to show a fifth straight month of gains in May, as the next economic indicator to drive oil prices.

US crude for July shed 19 cents to $74.42 a barrel at 0641 GMT, after jumping 2.4% on Thursday to close at $74.61, the highest settlement for a front-month contract since May 12. ICE Brent fell 15 cents to $75.26.

“Prices rebounded well on Thursday following another pretty strong set of US demand data and early readings of a potentially active hurricane season,” said Yingxi Yu, a Singapore-based commodities analyst with Barclays Capital. “But people are still generally quite nervous. This tension between very strong fundamental readings and still very cautious sentiment about the future will continue to lead to pretty high volatility. Ultimately strong fundamentals will take hold.”

Oil was heading for a second straight week of gains, helped by forecasts for an intense Atlantic hurricane season that may impact operations in the energy-rich Gulf of Mexico this summer. The Atlantic hurricane season may be the most intense since 2005, when hurricanes Katrina and Rita severely disrupted US oil production, refining and consumption by crashing through Gulf of Mexico energy facilities, the US government’s top weather agency said last week.

The fundamentals of the oil market painted a brighter picture. Both crude and gasoline stockpiles in the US posted bigger-than-expected drops last week, falling by 1.9 million barrels and 2.6 million barrels, respectively, the Energy Information Administration said on Thursday.

“We have been getting very strong indications from macro data that industrial activity is rebounding very strongly in the US,” Yu at Barclays said.