Oil climbed above $US60 a barrel in New York, as glutted US crude stockpiles receded and petrol markets firmed up.  Brent crude on the ICE Futures exchange settled at $US60.59 a barrel, up $US1.67. Oil rose after a weekly report on US stockpiles that analysts called a mixed bag. The Energy Information Administration reported crude inventories fell by 2.1 million barrels to 368.5 million barrels in the week ended May 15, triple the decline analysts expected. Yet US oil demand hardly improved, and remained 7.6 per cent weaker than a year ago, when Americans were already consuming less.

As next Monday’s Memorial Day holiday approaches, signalling the unofficial start of the US northern summer driving season, petrol demand gained 3.6 per cent last week, while stockpiles sank 4.3 million barrels to below-average levels, the EIA said.

Crude first cleared the $US60 hurdle in 2005, when the world economy and demand were growing and supplies were struggling to keep pace. Today, demand is shrinking for the first time in decades, leaving many baffled by the rally.

Harry Tchilinguirian, senior oil analyst at BNP Paribas Commodity Derivatives, called it “remarkable” that “under current economic conditions and high crude oil inventories we see oil return to $US60 a barrel.”

Crude is trading for less than half of year-ago levels, as demand has softened with the economic crisis. Expectations that consumers may once again want more oil when the recession bottoms have partly fuelled the rally, with traders watching the stock market for economic telltales.

Concerns about the reliability of supply have also begun to creep into the market, highlighted by an escalating conflict between rebels and securities forces in Nigeria’s oil-rich southern region this week.

Adding jitters to the market, major oil exporter Iran appears to have successfully test-fired a ballistic missile, a US official confirmed. Iranian President Mahmoud Ahmadinejad announced earlier that the country had tested a new two-stage, medium-range missile.

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