Oil Falls as Refiners Cut Operating Rates Amid Slower Demand

Dec. 3 (Bloomberg) -- Crude oil fell after an Energy Department report showed that U.S. refineries curbed operating rates as the recession crimps fuel demand.

Refineries operated at 84.3 percent of capacity, down 1.8 percentage points from the week before. It was the biggest one- week drop since September, when hurricanes Gustav and Ike struck the Gulf Coast. A 0.4 percentage-point increase was forecast. The report showed that total fuel use was down from a year earlier.

“The headlines are pretty bullish but that’s not the case when you look deeper,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “The drop in refinery runs was pretty disquieting. The drop in crude-oil supplies was due to falling imports as refiners cut back on deliveries.”

Crude oil for January delivery fell 17 cents, or 0.4 percent, to $46.79 a barrel at 2:42 p.m. on the New York Mercantile Exchange, the lowest settlement since Feb. 9, 2005. Futures have tumbled 68 percent since reaching a record $147.27 on July 11.

Consumption averaged 19.6 million barrels a day last week, up 0.6 percent from the week before and down 5.7 percent from a year earlier, according to the report. Gasoline demand rose as consumption of distillate fuel, a category including diesel and heating oil, dropped, the report showed.

U.S. Inventories

Crude-oil supplies fell 456,000 barrels to 320.4 million barrels last week, the department said. It was the first decline in 10 weeks. Inventories were forecast to climb 1 million barrels, according to the median of 13 responses in a Bloomberg News survey.

Supplies at Cushing, Oklahoma, where New York-traded West Texas Intermediate oil is stored, rose 2.35 million barrels to 22.9 million last week. The increase left inventories the highest since June 2007.

Gasoline stockpiles dropped 1.53 million barrels to 198.9 million in the week ended Nov. 28, the report showed. Supplies of distillate fuel, a category that includes heating oil and diesel, fell 1.72 million barrels to 125 million last week.

Brent crude oil for January settlement settled unchanged at $45.44 a barrel on London’s ICE Futures Europe exchange. Futures touched $44.87, the lowest since Feb. 14, 2005.