Oil: Price climbs near US$71 on US demand

LONDON - Oil climbed to near US$71 ($116) a barrel on Thursday, after a smaller-than-expected rise in US petrol stocks reignited talk of resilient oil demand in the world's top consumer, pushing inflation worries to the back burner.

US light crude for August settled 51 cents higher to US$70.84 a barrel, adding to gains of nearly a dollar on Wednesday, amid a petrol-led rally.

European benchmark Brent crude climbed 78 cents to US$69.95.

Petrol futures rose 2.5 per cent to US$2.118 a gallon on Thursday, adding to Wednesday's 3 per cent gain, after US government data showed a 300,000-barrel increase in petrol stocks -- against expectations of a bigger build.

"The market has regained its appetite for commodities. They are bullish on petrol and bullish about US demand," said Deborah White, analyst at Societe Generale.

US petrol demand over the past four weeks stood at 9.41 million barrels per day, up 0.9 per cent from a year ago.

"In all, the rumors of the demise of US demand seem to be premature," Barclays Capital said in a weekly report.

The market shrugged off a 1.4-million-barrel rise that pushed US crude oil stocks to their highest level in eight years.

The build was concentrated mainly in the West Coast, which statistically is less significant than the energy-hungry East and Gulf coast regions.

The data partly quelled concerns that tighter US monetary policy could dampen oil consumption in the world's top oil user, although the picture is different for other big consumers.

In Japan, the world's third largest oil user, crude imports in May plunged by more than a quarter from April, to their lowest level in two years, as refiners shut down for heavy spring maintenance, government data showed.

West African crude sales to Asia for July loading dropped to their lowest levels in nearly a year as Chinese refiners looked to reduce stock levels after demand failed to meet expectations, traders said.

The demand-supply equation remains fragile and prices have held in a US$68-73 band for more than six weeks, resisting much sharper falls in other commodity markets as oil-specific geopolitical concerns limit the impulse to sell.

Tensions over Iran were rekindled on Thursday when the United States sought Iran's response to proposals to halt its nuclear enrichment programme by mid-July.

Iranian president Mahmoud Ahmadinejad said on Wednesday Tehran would provide an answer by August 22.

- REUTERS