BLBG: Oil Snaps Five-Day Decline After Report Shows Drop in Supplies
By Grant Smith and Christian Schmollinger
Dec. 9 (Bloomberg) -- Crude oil climbed above $73 a barrel in New York, snapping a five-day decline, after an industry report showed a drop in U.S. crude inventories.
Oil rose for the first time in six days after the American Petroleum Institute said crude inventories fell by 5.82 million barrels last week. The U.S. Energy Department will release its weekly report today in Washington. Supplies of distillate fuels such as diesel and heating oil remain 33 percent higher than a year ago, according to the department.
“This is the first stage of the new cycle as the demand recovery on a global scale is underway,” said Tobias Merath, head of commodities research at Credit Suisse Group AG in Zurich. “What’s capping any break to the upside is the huge over-hang of distillates in the U.S. and low refinery margins.”
Crude oil for January delivery gained as much as 98 cents, or 1.4 percent, to $73.60 a barrel in electronic trading on the New York Mercantile Exchange. It was at $73.47 at 9:56 a.m. in London. Yesterday, the contract fell $1.31 to $72.62 a barrel, the lowest settlement since Oct. 9. Futures are up 64 percent this year.
Oil also gained as the dollar dropped, making commodities more attractive to investors as a currency hedge. The dollar was at $1.4764 against the euro from $1.4704 yesterday.
The Energy Department report is forecast to show that crude inventories increased 250,000 barrels in the week ended Dec. 4, according to a Bloomberg News 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 News.
Gasoline supplies fell 753,000 barrels last week, according to the API report. Inventories of distillate fuel, a category that includes heating oil and diesel, rose 1.01 million barrels to 168.9 million, the report showed.
The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires reports to be filed with the Energy Department for its weekly survey.
The Energy Department report will likely show gasoline inventories rose 1.6 million barrels in the week ended Dec. 4 from 214.1 million the prior week, according to a survey of analysts. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell 750,000 barrels from 165.7 million the prior week.
Brent Premium
Brent crude oil for January settlement rose as high $76.13 a barrel on the London-based ICE Futures Europe exchange. It was at $75.70 a barrel at 10:01 a.m. London time. The contract fell $1.24, or 1.6 percent, to $75.19 a barrel yesterday.
Brent traded at a premium of $2.50 a barrel to West Texas Intermediate contracts traded on New York today after widening to $2.57 yesterday, the highest since August. The Nymex contract has declined relative to the U.K. grade as U.S. stockpiles rose.
Oil inventories at Cushing, Oklahoma, the delivery point for Nymex futures, rose to 30.89 million barrels in the week ending Nov. 27, the highest since early September.
“The refinery runs are in the low 80’s or lower now, so we’ll have to see those runs get back up to 85 percent and then you can start taking those stocks out of Cushing,” said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. “The runs are really the key.”
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net.
