Oil Trades Near Six-Month High After OPEC Decision, Supply Drop

May 29 (Bloomberg) -- Crude oil was little changed near a six-month high after rising yesterday as OPEC decided to leave production quotas unchanged and a government report showed that U.S. inventories declined.

Saudi Arabian Oil Minister Ali al-Naimi said that the group opted not to alter its output targets because “prices are good, the market is in good shape.” Oil should stay in a $60 to $70 range for the rest of the year, OPEC Secretary General Abdalla el-Badri said. The Energy Department said yesterday that U.S. oil supplies fell the most since September.

“Oil was firmer reflecting probably more macro influences than oil specific fundamentals,” said David Moore, a commodity strategist with Commonwealth Bank of Australia in Sydney. “The EIA data was supportive for the oil price.”

Crude oil for July delivery dropped 30 cents to $64.78 a barrel on the New York Mercantile Exchange at 9:43 a.m. in Sydney. Yesterday, the contract rose $1.63, or 2.6 percent, to settle at $65.08 a barrel, the highest since Nov. 5.

Oil futures in New York have gained 45 percent this year on speculation that demand will revive as the global economy starts to recover. “If we are able to keep this $60 to $70 price for the remainder of the year, it will be fine,” OPEC’s El-Badri said in a Bloomberg Television interview.

U.S. stocks rallied, led by banking and energy shares, as a rebound in 10-year Treasuries eased concern record government debt sales will trigger higher borrowing and oil climbed. The Standard & Poor’s 500 Index added 1.5 percent and the Dow Jones Industrial Average advanced 1.3 percent.

U.S. Inventories

U.S. crude inventories declined 5.41 million barrels to 363.1 million last week, according to the Energy Department. It was the biggest drop since September, when hurricanes hit the Gulf of Mexico coast. A 150,000-barrel reduction was forecast, according to the median of 12 analyst responses in a Bloomberg News survey.

The decline left inventories 27 percent higher than the five-year average, up from a 23 percent surplus a week earlier. Stockpiles were the highest since 1990 in the week ended May 1.

“The oil market fundamentals still remain relatively fragile, notwithstanding the gains in the oil price,” Commonwealth’s Moore said.

Refineries operated at 85.1 percent of capacity, up 3.3 percentage points from the previous week, the biggest gain since October, the report showed.

Gasoline stockpiles dropped 537,000 barrels to 203.4 million, the lowest since the week ended Dec. 5, according to the report.

‘Energy Bull Alive’

Gasoline for June delivery fell half a cent, or 0.3 percent, to $1.9055 a gallon in New York at 9:33 a.m. in Sydney. It rose 1.88 cents, or 1 percent, to end yesterday’s session at $1.9105 a gallon in New York, the highest settlement since Oct. 13.

“It seemed like the oil market did not care what OPEC had to say, even if it was negative for oil, the energy market was going to go up no matter what,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “The energy bull is very much alive in the market and I am not sure what will put him down.”

Saudi Arabia’s Al-Naimi forecast that oil may rise to $75 a barrel by this year’s third or fourth quarter. The group’s next meeting will be on Sept. 9, he said.

Other OPEC ministers said the group would work toward finishing previously announced reductions. The Organization of Petroleum Exporting Countries has yet to complete output cuts totaling 4.2 million barrels a day agreed to last year.

“I don’t buy the story that we are going to go to $150 next week,” Jan Stuart, Macquarie Group Ltd.’s oil analyst in New York, said in an interview with Bloomberg Television. “What I do buy is that there is the beginning of a recovery.”

The production ceiling is 24.845 million barrels a day for 11 of its members. They pumped 25.812 million a day in April, a May 13 report from the group showed. Iraq has no quota.

Brent crude for July settlement gained $1.89, or 3 percent, to end yesterday’s session at $64.39 a barrel on London’s ICE Futures Europe exchange, the highest since Nov. 4.