BLBG: Oil Rises Most in 2 Months as Supplies Fall, Iran Tests Missile
By Margot Habiby
Dec. 16 (Bloomberg) -- Crude oil futures rose the most in two months after U.S. oil inventories dropped to the lowest level since January and Iran successfully tested a medium-range missile, drawing threats of sanctions.
Oil climbed as much as 3.8 percent as the Energy Department reported supplies fell 3.69 million barrels last week to 332.4 million, the lowest amount since Jan. 9. The U.S. and U.K. governments said Iran’s test of a surface-to-surface missile undermines its claim of peaceful intentions.
“The report was definitely supportive, but now we’ll go back to focusing on other things like the Fed and Iran, which will give us some more direction as the day goes on,” said Phil Flynn, vice president of research at PFGBest in Chicago.
U.S. Federal Reserve policy makers meeting today are expected to hold interest rates near a record low to support economic growth.
Crude oil for January delivery rose $2.30, or 3.3 percent, to $72.99 a barrel at 11:05 a.m. on the New York Mercantile Exchange. Oil traded at $71.71 before the release of the report at 10:30 a.m. in Washington. Futures touched $73.37, the highest since Dec. 9. Oil has climbed 64 percent this year.
Stockpiles were expected to decline by 2 million barrels in the week ended Dec. 11, from 336.1 million the prior week, according to the median of 17 estimates in a Bloomberg News survey.
Imports of crude oil declined 4.5 percent to 7.77 million barrels a day, the lowest since September 2008, when ports were shut because of hurricanes Gustav and Ike.
Refinery Operations
Refineries operated at 80 percent of capacity last week, down 1.1 percentage point from the prior week, the report showed. Analysts surveyed by Bloomberg News forecast there would be a 0.3-percentage-point gain.
“You put the response to the Iran missile test together with higher equity prices, a lower dollar, favorable chart patterns and the DOEs, and you’re looking at a buy,” said Richard A. Ilczyszyn, a senior market strategist with Lind- Waldock & Co. in Chicago.
Iran’s test of the upgraded Sejil-2 surface-to-surface missile “does make the case for us moving further on sanctions,” U.K. Prime Minister Gordon Brown said. Mike Hammer, spokesman for U.S. President Barack Obama, called the test worrying and said it would reinforce the concerns of the international community.
Iran is OPEC’s second-largest oil producer.
“This geopolitical calculation is going to re-emerge as we head into the new year,” said John Kilduff, a partner at Round Earth Capital, a New York-based hedge fund that focuses on food and energy-commodity investments. Developments in the Middle East and North Korea “argue that the security premium is coming back into the price of oil.”
Declining Dollar
The dollar fell as much as 0.4 percent against the euro, boosting commodities as an alternative investment. The U.S. currency was trading at $1.4581 per euro at 11:07 a.m. in New York, compared with $1.4538 yesterday.
The Federal Open Market Committee gathers as growth in the final quarter of 2009 accelerates to more than 4 percent, the fastest pace in almost four years, according to analysts’ forecasts. The FOMC will probably discuss how to eventually withdraw unprecedented programs to revive credit, including purchases of $1.43 trillion in housing debt, economists said.
Gasoline Demand
U.S. gasoline consumption rose 1.5 percent in November from a year earlier as the economy recovers from the recession, the American Petroleum Institute said today.
Total U.S. daily fuel demand averaged 18.8 million barrels in the four weeks ended Dec. 11, down 1.8 percent from a year earlier, the Energy Department report showed. That’s up from a 3 percent year-on-year deficit reported last week.
Gasoline inventories gained 879,000 barrels, or 0.4 percent, to 217.2 million barrels last week. They were forecast to rise 1.25 million barrels, based on the median estimate of 18 analysts in the Bloomberg survey. Distillate stocks dropped 2.95 million barrels to 164.4 million, compared with a forecast 500,000-barrel decline.
Oil inventories at Cushing, Oklahoma, the U.S. midcontinent oil hub, rose for a seventh week, increasing 2.3 percent to 34.1 million barrels.
U.S. housing starts rose 8.9 percent in November, in a sign of a continuing economic recovery that may boost energy demand.
U.K. unemployment unexpectedly fell for the first time since February 2008, adding to signs the economy is emerging from its deepest recession in at least three decades.
January crude oil options expire at the close of floor trading on the Nymex today, which may cause the market to be more volatile than usual.
The January contract for Brent crude oil on the London- based ICE Futures Europe exchange also expires today. Brent for January settlement rose $1.80, or 2.5 percent, to $73.85 a barrel. The more widely traded February contract gained $1.78, or 2.4 percent, to $74.65 a barrel.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
