Crude Oil Little Changed After Rising on U.S. Equities Rally

March 27 (Bloomberg) -- Crude oil was little changed near the highest in almost four months after the U.S. stock market advanced yesterday, signaling that fuel demand will increase.

Oil climbed 3 percent yesterday as equities rallied on better-than-estimated earnings at Best Buy Co. and ConAgra Foods Inc. The average price of gasoline at the pump rose to $2 a gallon for the first time since November as U.S. supplies fell.

“Oil is in the midst of a gentle upswing because there are finally glimmers of hope on the economic horizon,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts.

Crude oil for May delivery fell 25 cents, or 0.5 percent, to $54.10 a barrel at 10:31 a.m. Sydney time on the New York Mercantile Exchange. The contract rose 3 percent to $54.34 yesterday, the highest settlement since Nov. 28. Prices are up 21 percent this year.

The average price for regular gasoline at the pump nationwide rose 2.3 cents to $2.009 a gallon, AAA, the nation’s biggest motoring organization, said yesterday on its Web site.

Gasoline inventories fell 1.14 million barrels to 214.6 million last week. The drop left supplies 0.4 percent lower than the five-year average for the week, the Energy Department said.

Crude Oil Inventories

U.S. oil supplies rose 3.3 million barrels to 356.6 million in the week ended March 20. It was the 22nd gain in 26 weeks and left stockpiles 13 percent higher than the five-year average for the period.

Crude oil stockpiles at Cushing, Oklahoma, where New York- traded West Texas Intermediate crude is delivered, fell 2.21 million barrels to 31.7 million last week.

Consumption of fuels rose 2.2 percent to 19.2 million barrels a day last week, yesterday’s Energy Department report showed. Daily fuel demand averaged over the past four weeks was 19.1 million barrels, down 3.2 percent from a year earlier.

“Fuel demand is going to pick up even if it remains below year-ago levels,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Refineries are eventually going to have to raise runs, and that will eat away at the crude oil in storage.”

The Commerce Department said in a report yesterday that gross domestic product contracted at a 6.3 percent annual rate in the fourth quarter, less than the 6.6 percent forecast in a Bloomberg News survey.

Worst Over

“Some of the economic numbers suggest that the worst may be over,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “Energy prices can’t continue to move higher unless these numbers translate into either declines in supply or an increase in demand.”

The Standard & Poor’s 500 Index added 2.3 percent to 832.86 yesterday. The gauge is up 13 percent in March. The Dow Jones Industrial Average increased 174.75 points, or 2.3 percent, to 7,924.56.

“The oil market is ignoring its own incredibly bearish fundamentals and trading with equities,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “There’s been a renewal of investor interest in commodities.”

Production Cuts

The Organization of Petroleum Exporting Countries has agreed to production cuts of 4.2 million barrels a day since September after prices tumbled from record highs. The group decided against any further output constraints at a meeting in Vienna on March 15. OPEC will convene again there on May 28.

“When OPEC meets in May, they may be inclined to make another cut because they want to see prices in the $60 to $70 range,” said Robert Ebel, chairman of the energy and national security program at the Center for Strategic and International Studies in Washington. “If they don’t succeed in getting prices in that area, we will be up for a wild ride in a couple years when demand picks up.”

OPEC will reduce crude-oil shipments by 3.3 percent in the month ending April 11, according to Oil Movements. Members will load 22.23 million barrels a day in the period, down from 23 million a day in the month ended March 14, the Halifax, England- based tanker tracker said in a report yesterday.

“The scope of the OPEC cuts is surprising,” Mueller said. “It will take a little while for the OPEC cuts to work their way through the system.”