Oil prices have spiked by more than 7% to hover around US$45 a barrel on release of data showing an unexpected drop in US crude stocks and an increase in gasoline demand. Also supporting prices is news from No. 2 oil consumer China that it’s manufacturing index has risen for the third consecutive month. London Brent crude rose by over two dollars to US$46. per barrel. The Energy Information Administration has reported that crude inventories have dropped by 700,000 barrels to 350.6 mln barrels for the week ended Feb. 27. Falling US crude inventories could be an indication of stabilizing demand that has been deteriorating for months. The recent evidence is that the rate of decline has possibly started to slow.
OPEC is likely announce production cuts of about 1 mln bpd at it’s next meeting on March 15, adding to the 4.2 mln bpd the cartel has pledged to reduce since September.