Crude Oil Falls on Increase in Stockpiles, Recession Concerns

Jan. 23 (Bloomberg) -- Crude oil fell after a U.S. government report showed a bigger-than-forecast gain in crude stockpiles, and as weak corporate earnings and economic data signaled a deepening recession.

Supplies of crude oil rose 6.1 million barrels to 332.7 million last week, the highest since August 2007, the Energy Department said yesterday. Stockpiles were forecast to climb by 1.4 million barrels, according to a Bloomberg News survey of analysts. Gasoline and distillate fuels also rose more than expected. U.S. stocks slid yesterday as companies from Microsoft Corp. to Fifth Third Bancorp reported disappointing earnings.

“The crude increase was significant and the gasoline number was huge,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “We saw product supplies increase despite a significant decrease in refinery runs and lower prices.”

Crude oil for March delivery fell 52 cents, or 1.2 percent, to $43.15 a barrel at 10:53 a.m. Sydney time on the New York Mercantile Exchange. Prices are down 2.1 percent so far this year and 51 percent lower than a year ago. Yesterday, crude oil future rose 12 cents to settle at $43.67 a barrel.

The oil market tracked equities yesterday, with the Dow Jones Industrial Average falling 105.3 points, or 1.3 percent, to 8,122.8.

Fuel Demand Drops

U.S. fuel consumption during the four weeks ended Jan. 16 averaged 19.4 million barrels a day, down 4.7 percent from a year earlier, the Energy Department report showed.

Supplies at Cushing, Oklahoma, where oil traded on Nymex is stored, climbed 0.7 percent to 33.2 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.

Stockpiles in the Mid-Continent, known as PADD 2, increased 1.7 percent to 82.2 million barrels, the highest since the week ended June 26, 1998, when oil was trading at about $14 a barrel. Oklahoma is in PADD 2.

Gasoline inventories increased 6.48 million barrels to 220 million, the Energy Department said. Stockpiles were forecast to climb by 1.8 million barrels, according to the Bloomberg News survey. Refineries reduced operating rates, or runs, by 2 percentage points as fuel consumption tumbled.

Gasoline futures for February delivery dropped 8.04 cents to $1.0934 a gallon at 2:50 p.m. in New York yesterday, the lowest settlement since Jan. 12. Futures are up 8.5 percent for the year and are 52 percent lower than a year ago.

April Oil

The price of oil for delivery in April is $2.16 higher than for March, and December futures are up $10.23 from the front month. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango, and is often an indicator of oversupply.

Companies including Citigroup Inc.’s Phibro LLC, Royal Dutch Shell Plc and BP Plc have stored oil on tankers, as the contango allows them to profit from hoarding crude.

Refineries operated at 83.3 percent of capacity last week, the Energy Department report showed, the lowest for the week since 1991. Analysts forecast that there would be a 0.5 percentage point drop.

Housing starts and jobless claims signaled that the recession in the U.S., the world’s biggest oil-consuming country, is deepening.

Gasoline Prices

Housing starts fell 16 percent last month to an annual rate of 550,000, the lowest since the government started compiling statistics in 1959, the Commerce Department said yesterday in Washington. Another government report showed the number of Americans filing first-time claims for unemployment benefits rose last week, matching a 26-year high.

Regular gasoline at the pump, averaged nationwide, increased 0.2 cent to $1.85 a gallon, AAA, the largest U.S. motorist organization, said on its Web site yesterday. Prices have declined 55 percent from the record $4.114 a gallon reached on July 17.

Distillate supplies, which include heating oil and diesel, rose 790,000 barrels to 145 million barrels. Stockpiles were forecast to climb by 500,000 barrels.

Heating oil for February fell 3.74 cents, or 2.7 percent, to settle at $1.3486 a gallon in New York yesterday.

“We had a build in distillate supplies even though it’s January and freezing outside,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Any distillate build is very bearish at this time of year.”

Saudi Arabia, the world’s top oil exporter, decided to cut production by 300,000 barrels a day below its OPEC quota to prop up prices, Algerian Oil Minister Chakib Khelil told the state- run newspaper El Moudjahid. The desert kingdom will make the reduction before a March 15 meeting of the Organization of Petroleum Exporting Countries.

Brent crude oil for March settlement rose 37 cents, or 0.8 percent, to settle at $45.39 a barrel on London’s ICE Futures Europe exchange.