* Oil recovers from falls on bearish API crude stocks data
* Upbeat economic data seen largely factored into oil prices
* OPEC unlikely to increase output at September meeting
(Updates throughout, changes dateline, previous SINGAPORE)
By David Sheppard
LONDON, Aug 26 (Reuters) - Oil edged above $72 a barrel on
Wednesday on bullish economic data and firm equities, but prices
remain more than $2 below the 10-month high hit in the previous
session as a surprise jump in U.S. crude stocks hit sentiment.
U.S. crude for October <CLc1> was up 36 cents to $72.41 a
barrel by 0847 GMT, after falling $2.32 on Tuesday.
Brent crude <LCOc1> rose 50 cents to $72.32 a barrel after
losing $2.44 the previous day.
Investors took the opportunity to lock-in profits on Tuesday
after crude touched the key psychological $75 a mark for the
first time since last October, crowning a near 130 percent jump
in prices from the lows at the turn of the year.
The sell-off was extended after the American Petroleum
Institute (API) reported an unexpected 4.3 million-barrel rise
in U.S. crude stocks, confounding analysts' expectations for a
1.1-million-barrel fall, and coming after the 8.4-million-barrel
drop the week before which had sparked the latest rally. []
"A lot of people are expecting a build in crude stocks
because last week's draw was large," said Tony Nunan, risk
manager at Tokyo-based Mitsubishi Corp.
"People are holding stocks offshore and sooner or later
these would show in crude stocks in the U.S."
Gasoline stocks fell 1.8 million barrels, the API said, more
than the 1 million-barrel drop predicted, while distillates
dipped by 146,000 barrels, versus forecasts for a 300,000 barrel
rise.
Nunan noted that while the figures from industry body API
have occasionally diverged from those of the government Energy
Information Administration (EIA), due out at 1430 GMT on
Wednesday, the two have been consistent for the last two weeks.
PRICING IN A RECOVERY?
Oil prices were supported on Wednesday by rising equities
and weakness in the U.S. dollar, which traders said have been
the two key external factors in the crude market in 2009.
Investors have been viewing strength in equity markets as a
sign of impending economic recovery, which should boost demand
for oil, while weakness in the dollar tends to boost buying of
commodities priced in the greenback.
World stocks steadied just off this week's 10-month high on
Wednesday while a closely-watched German survey showed a
bigger-than-expected improvement in business morale as it rose
for the the fifth month running. []
"Improving global demand is pulling the industrial sector
out of its recent slump," Jennifer McKeown at Capital Economics
said, but noted that any recovery is unlikely to be speedy.
Oil analysts said a lot of the positive economic data had
already been factored into the price of crude by traders, while
global stocks of crude remain at very high levels.
Venezuela's oil minister Rafael Ramirez said oil prices
could reach an average of $70 a barrel by year-end if "current
conditions hold", and could go as high as an average $75 in the
last quarter.
But despite concerns from some quarters that oil prices are
too high for a world economy still struggling to emerge from the
biggest economic crisis since the 1930s, Ramirez said OPEC is
not expected to raise output at its September meeting as global
oil stocks are too high.
"Inventories have declined but they remain above average. We
need for them to come down to the average levels," Ramirez said
[]
Another member of the Organization of the Petroleum
Exporting Countries, Iran, said oil demand was set to increase
next year after this year's decline.
"Considering the relative recovery of the global economy, it
is expected that oil demand in the year 2010 will be increased
between 500,000 and 1 million barrels," the Mehr News Agency
quoted its OPEC governor Mohammad Ali Khatibi as saying.
(Additional reporting by Ramthan Hussain in Singapore; editing
by Peter Blackburn)
