Oil Above $67, Stockpiles Counter Economic Worries

Headwinds in world's top economies weigh on outlook for demand; U.S. crude stocks fell for 2nd week.

Oil prices steadied above $67 a barrel in choppy trading on Thursday as the market shook off concerns surrounding the overall glut of crude in the Atlantic Basin.

The focus turned to last week's drawdown in U.S. crude stockpiles and spot demand for crude oil in Asia, sidestepping questions surrounding U.S. production growth and shaky economic data globally.

"There are a lot of movements...but the strength in Asia is starting to filter through," said Amrita Sen, chief oil analyst with Energy Aspects.

June Brent crude was trading 39 cents higher at $67.20 a barrel as of 1139 GMT, after trading as low as $66.32. U.S. crude for June delivery, at $60.60, was 10 cents higher, after touching $59.82.

Despite this, lingering oversupply led some to question prices that are still within touching distance of the 2015 highs reached last week.

While crude stocks in the United States fell for the second week, by 2.2 million barrels, following four months of steady gains, stockpiles were still almost 90 million barrels higher than this time last year.

"One thing is for sure, there is no prospect of a global oil supply shortage in the foreseeable future," said Tamas Varga of PVM.

A surprise increase in output in the No. 2 U.S. oil-producing state, North Dakota, in March added to supply concerns. The International Energy Agency also warned on Tuesday that the global oil glut is building.
            
Global demand growth for fuels was also in question, with uncertain economic indicators pulling crude oil lower during earlier trading.

China, the world's top energy consumer, saw its economy losing more steam in April despite easier monetary policy, while Europe's largest economy, Germany, slowed in the first quarter. In the United States, retail sales were flat in April, dampening hopes of a sharp rebound in growth in the second quarter.
         
Still, the market remained split as speculative bets on higher prices looked to a weaker dollar, which makes commodities purchased in the currency more affordable elsewhere, as well as drawdowns in U.S. stockpiles of diesel and gasoline in advance of the summer driving season.

"The jury is still very much out as to whether the current price level of $65-$70 a barrel in Brent is a true reflection of the global supply/demand balance," Varga said.

By Libby George