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Crude remains above $86 after China reports Q1 GDP growth, US stockpiles decline

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Oil prices rose today on improved demand outlook after a GDP update from China and this week’s US inventories data, which revealed unexpected draws in crude stocpiles.

The world’s second largest energy consumer China has reported strong Q1 growth, saying its GDP increased 11.9% year on year in the first three months of 2010.

Signs point to a recovery in oil demand in the world’s largest consumer, the United States. Yesterday’s oil inventories update from Energy Information Administration (EIA) showed that crude stockpiles shed 2.2 million barrels last week, which marked the first decline in inventories since January. This was complemented by an increase in refinery utilisation.

The EIA report also said that gasoline stockpiles declined by 1.1 million barrels, while distillates, which include diesel and heating oil, rose by 1.1 million barrels.

On Tuesday, the American Petroleum Institute (API) said that US oil stockpiles increased by a further 1.4 million barrels last week, while gasoline stockpiles and distillates, which include diesel and heating oil, added 1.6 million barrels and 1.7 million barrels respectively.

Oil prices have fallen from 2010 highs at nearly US$87/barrel over the past two weeks on demand concerns as crude stockpiles in the US kept shrinking despite a rally in equity markets and positive economic data.

Despite thee rising oil prices, OPEC (Organization of Petroleum Exporting Countries) has no plans to increase output any time soon as Chairman of Libya’s National Oil Corp said that the current fluctuations did not warrant a policy change, which could come if the prices stabilise above US$90-95/barrel.

June Brent Crude improved to US$86.64/barrel, while US light, sweet crude for June delivery reached US$86.82/barrel on the New York Mercantile Exchange (NYMEX).

Most blue chip oil and gas producers were on the rise today. BP (LSE: BP) advanced 1.25%, while fellow supermajors Shell (LSE: RDSB) was flat, as was BG Group (LSE: BG). Cairn Energy (LSE: CNE) advanced 1.6% to take the lead, while another FTSE 100 constituent Tullow Oil (LSE: TLW) added less than 1%.

Amec (LSE: AMEC) also posted a small gain, while another oil and gas engineering firm Petrofac (LSE: PFC) climbed 2.4%.

Midcaps followed the trend. Dana Petroleum (LSE: DNX) was the leading performer in the sector in the FTSE 250 with a 3% gain. JKX Oil & Gas (LSE: JKX), Melrose Resources (LSE: MRS) and Salamander Energy (LSE: SMDR) advanced 2.3%, 1.5% and 1.35% respectively. Heritage Oil (LSE: HOIL) and Premier Oil (LSE: PMO) added less than 1%.

Dragon Oil (LSE: DGO) and Soco International (LSE: SIA) held steady.

Wood Group (LSE: WG) posted a small loss, while another services company Wellstream Holdings (LSE: WSM) was flat.

Juniors didn’t show much movement. EU operating Rome-based oil junior Mediterranean Oil & Gas (AIM: MOG) and Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) were in decline, shedding more than 5%.

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