BS: Oil trades near $78; report shows gain in stockpiles
Crude oil traded near $78 a barrel in New York after an industry report showed US supplies gained, raising concern that fuel demand in the biggest energy-consuming nation may be slow to recover.
Oil pared Tuesday’s gains after the American Petroleum Institute reported crude inventories rose 2.89 million barrels last week. Gasoline and distillate fuel stockpiles also climbed on a drop in refinery utilization, the report said.
“Across the board this is pretty bearish,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “Here we are into the fourth quarter and we aren’t getting any draws in inventories, especially in distillate fuels. It’s just not good for demand.”
Crude oil for January delivery traded at $78.27 a barrel, down 10 cents, in electronic trading on the New York Mercantile Exchange at 12:07 p.m. Singapore time. Yesterday, the contract rose $1.09, or 1.4 percent, to settle at $78.37. Oil fell below $77.80 following the API report, which came after settlement.
Prices have gained 75 percent this year.
Crude gained after reports yesterday showed signs of increased manufacturing output in the US and China, responsible for about 32 percent of global oil consumption. India’s oil processing climbed 7.2 percent in October from a year earlier, the country’s Oil Ministry said on November 25.
“Yesterday’s report shows that demand isn’t that great in the US,” Nunan said. “But with India and China in terms of manufacturing, we can expect good oil demand growth out of those countries.”
The US Energy Department will release its weekly supply report in Washington. Inventories are forecast to decline, according to a Bloomberg News survey.
The Energy Department report is forecast to show that crude inventories fell 450,000 barrels, according to the survey. Oil-supply totals from the API and Energy Department moved in the same direction 75 percent of the time in the past four years, according to data compiled by Bloomberg.
“What is really important now is for industrial production in the US to come back online,” Ben Westmore, an analyst with National Australia Bank in Melbourne, said by telephone.
“Compared to the last 20 years, distillate stocks are still pretty much the highest they’ve been.”
Inventories of distillate fuels, which include heating oil and diesel, rose 1.06 million barrels to 168 million, the API report showed. The Energy Department will probably say stockpiles fell 350,000 barrels last week, according to the Bloomberg News survey. Supplies are at 166.9 million barrels, the highest since January 1983.
“Part of that is going to be whittled away by the US winter and demand for heating oil but the other big thing, and probably more important, is the industrial production story,” Westmore said. “Once that comes back online you expect, not withstanding more refinery operation, that distillate product will be wound down.”
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.
Brent crude oil for January settlement were unchanged at $79.39 a barrel on the London-based ICE Futures Europe exchange at 12:08 p.m. Singapore time. The contract rose 88 cents, or 1.1 percent, to end the session at $79.35. (Bloomberg)
