Oil and natural gas prices rise as inventories move south

May 30, 1:24 PMDallas Oil and Gas ExaminerAlisa Martin

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A gas tanker is shown at a gas station in Redwood City, Calif., Friday. Oil
and gasoline prices continued a recession-defying march higher Friday,
doubling in the past six months largely on optimism of a strengthening
economy. The predictions for just how high oil can reach this year
continue to creep upward just five months removed from crude priced
around $32 per barrel. (AP Photo/Paul Sakuma)

United States inventories data this week showed a fall in crude oil stockpiles that was greater than expected by analysts, and stockpiles of natural gas rising less than expected.

Global demand for crude oil continued its downward trend, with OPEC, the International Energy Agency and Energy Department all cutting their projections for demand this month.

Yet during May 2009, the price of a barrel of crude rose $15, topping $66 per barrel, registering a six-month high. In the final week of May, natural gas futures rose the most in 10 weeks -- more than $0.25 -- settling at $3.87 per MMBTU.

Conventional wisdom says the price increases may be temporary, that is, unless, the economy picks up at a rate faster than was previously expected.

As paraphrased on Bloomberg, OPEC Secretary General Abdalla el-Badri said that the rally in oil prices is being driven by improving sentiment about the global economy, and isn't supported by demand.

Speaking to reporters from the OPEC meeting in Vienna, el-Badri said that global crude stocks remain very high, though prices may reach $70 to $75 per barrel by year end, in part because speculators are returning to the commodity markets.

Saudi Arabian Oil Minister Ali al-Naimi said OPEC opted not to alter its output targets because “prices are good, the market is in good shape.”