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UPDATE 2-Oil holds steady on big U.S. stock draw; strong dollar caps prices

Published 30/07/2015, 04:15 pm
© Reuters.  UPDATE 2-Oil holds steady on big U.S. stock draw; strong dollar caps prices
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* U.S. crude stocks fall by 4.2 million barrels

* Drawdown 'shortlived' as demand eases -oil risk manager

* Concerns over U.S. rig increase "overblown" -Morgan Stanley (Adds Morgan Stanley (NYSE:MS) comment, updates prices)

By Keith Wallis

SINGAPORE, July 30 (Reuters) - Oil prices held steady in Asian trade on Thursday after a larger than expected draw in U.S. crude and gasoline stocks strengthened the outlook for oil demand.

But gains were capped by a stronger dollar, and despite the drop in oil stocks some commentators warned of a global supply glut, with OPEC members producing 3 million barrels per day more than demand in the second quarter. ID:nL5N1083OI

U.S. crude stockpiles fell by 4.2 million barrels in the week to July 24, more than twenty times analysts' expectations of a decrease of 184,000 barrels, Energy Information Administration (EIA) data showed. ID:nL1N1091JP

Gasoline stocks dropped by 363,000 barrels against analysts' forecasts of a 512,000-barrel gain, with U.S. gasoline demand up 6.2 percent from a year ago.

The large drawdown in stocks could be short-lived, said Tony Nunan, oil risk manager at Tokyo's Mitsubishi Corporation.

"The EIA data shows demand is being stimulated by lower oil prices. It could be a flash in the pan. We have passed peak summer demand. It could be temporary," he said.

Morgan Stanley said in a note on Thursday concerns the recent rise in the number of active U.S. drilling rigs would increase oil supply were "overblown".

"The recent increase in rigs is a result of higher prices several months ago, not a new trend. We continue to see subdued U.S. activity and declining tight oil production through much of 2016," the note said.

Brent crude for September delivery LCOc1 rose 20 cents to $53.58 a barrel as of 0613 GMT, after settling 8 cents higher in the previous session.

U.S. crude for September delivery CLc1 slipped 3 cents to $48.76 a barrel, after ending the previous session up 81 cents, or 1.7 percent. The benchmark rose to $49.02 in Asia's morning session.

"Prices should continue to hold at current prices and (we) doubt there would be further drops," said Daniel Ang, investment analyst at Singapore's Phillip Futures in a note on Thursday.

Brent should find resistance at $54 a barrel, while resistance would come at $49.50 for U.S. crude, Ang said.

"The outlook still remains cautious for crude oil prices, especially Brent oil. Prices may not get any relief in the short term as players are expected to continue the fight for market share at the expense of price," ANZ said in a note on Thursday.

A stronger dollar, buoyed by the outcome of a two-day U.S. Federal Reserve meeting that saw the economy and jobs continuing to strengthen, was also weighing on prices.

A strong greenback makes dollar denominated commodities more expensive for holders of other currencies.

Investors are eyeing the release of key European and U.S. consumer confidence, GDP and jobs data later on Thursday.

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For a 24-hr chart analysis on Brent:

http://graphics.thomsonreuters.com/US/2/PVB_20153007090043.png

For a 24-hr chart analysis on U.S. oil:

http://graphics.thomsonreuters.com/US/2/PVB_20153007083415.png

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Ed Davies and Biju Dwarakanath)

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