Oil futures up on oil demand projection

Crude futures gained July 28 after the U.S. Department of Energy gave a mixed picture of U.S. petroleum stocks but suggested that it may raise its 2005 projection for oil demand.

Analysts said that tightening crude supplies in the United States, the world’s largest oil consumer, heighten supply-related fears and could push prices to new highs.

Light, sweet crude for September delivery was up 30 cents to $59.41 a barrel on the New York Mercantile Exchange.

In London, the September contract for Brent crude on the International Petroleum Exchange gained 19 cents to $58.20 a barrel.

Oil prices are about 40 percent higher than a year ago. The U.S. weekly inventory data, released July 27, showed a decline in domestic inventories of crude oil last week but an increase in the supply of distillate fuel, which includes heating oil and diesel. But the weekly report showed a somewhat larger-than-expected drop in the nation’s commercial supply of gasoline.

The Department of Energy’s statistical office, the Energy Information Administration, said it revised upward its total demand figures for last year and said it could do the same for this year as well.

“Revisions are the norm,” the EIA said, adding that “higher final 2005 numbers are likely.” That seems to run counter to recent projections by the Paris-based International Energy Agency and the Organization of Petroleum Exporting Countries, which have cut forecasts for world oil demand growth, citing weaker-than-expected consumption in China that sent prices downward.

“The 2004 revision comes at a time when demand growth appears (to some) to be unchecked by higher oil prices,” the EIA said in its report. “Because this seems counterintuitive to some analysts, there may be some tendency to view revised 2004 data-based comparisons as signaling a demand slowdown, partially attributable to high oil prices.”

The midweek data snapshot showed crude oil stocks fell by 2.3 million barrels to 317.8 million barrels, or 7 percent above year-ago levels.

—The Associated Press