Oil Little Changed; Refiners May Cut Output on High Stockpiles

Sept. 15 (Bloomberg) -- Crude oil traded little changed near $69 a barrel on speculation U.S. refiners may cut operating rates to avoid adding to historically high fuel stockpiles.

U.S. crude oil inventories probably fell last week as refineries bought fewer cargoes before idling plants for seasonal maintenance, according to a Bloomberg News survey ahead of an Energy Department report tomorrow. The country’s supplies of distillate fuel are expected to have risen for a fourth week from their highest levels since 1983.

“We will be looking for some usual Tuesday price consolidation with the weekly API and EIA stats likely to influence market direction during the last half of this week,” said Jim Ritterbusch, president at trading adviser Ritterbusch and Associates in Galena, Illinois. “Average industry ideas thus far suggest a crude stock draw. Product supplies are generally expected to post a small increase.”

Crude oil for October delivery was at $69.03 a barrel in electronic trading on the New York Mercantile Exchange, up 17 cents at 7:26 a.m. in Singapore. Yesterday, the contract fell a second day to $68.86, the lowest settlement since Sept. 4. Futures have gained 55 percent this year.

Big consumer nations including the U.S. and Japan have been accumulating fuel stockpiles as the global recession crimped demand. Refiners are cutting back output to support profits as consumption enters a seasonal lull period.

“The driving season is over, heating oil demand has yet to pick up and refineries are going into turnarounds, which means a lot of demand for crude oil will be offline,” said Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania.

Product Stockpiles

Commercially held U.S. crude oil inventories likely declined 2.5 million barrels from 337.5 million in the week to Sept. 11, according to the median of 11 estimates from analysts.

Stockpiles of distillate, which includes heating oil and diesel, may have increased 1.5 million barrels from 165.6 million in the prior week, while gasoline inventories probably climbed 700,000 barrels from 207.2 million, the survey showed.

Refineries operated at 86.7 percent of capacity last week, a drop of 0.5 percentage point, according to the median of survey responses.

The Energy Department is scheduled to release its Weekly Petroleum Status Report tomorrow. The industry-funded American Petroleum Institute will put out its own data at 5:30 p.m. in Washington today.

“If we are able to close below $67, there’s a potential of testing $60 and maybe $50 by the end of the year,” said Richard Ilczyszyn, a senior market strategist with Lind-Waldock in Chicago. “There’s no lack of crude, and demand is set to drop with the end of the driving season. I don’t see us moving higher unless the dollar gets a lot weaker.”

Cease-Fire Ending

The main militant group in Nigeria said it will end its 60- day cease-fire today.

The Movement for the Emancipation of the Niger Delta, or MEND, which seeks more local control of the delta’s oil wealth, declared a unilateral cease-fire July 15 after the government freed its leader, Henry Okah, who was on trial for treason. MEND rejected a government amnesty program, saying it failed to deal with its political demands.

Jomo Gbomo, a spokesman for MEND, said he wouldn’t “speculate at this time” on when its attacks may resume. When they do, he said in an e-mailed response to questions, they “will be carried out with utmost zeal.”

Armed attacks targeting the oil industry have cut more than 20 percent of Nigeria’s oil exports since 2006 and deterred new investments. The country vies with Angola as Africa’s top oil producer and is the fifth-largest source of U.S. oil imports.

Brent crude oil for October settlement ended yesterday’s trading at $67.44 a barrel on the London-based ICE Futures Europe exchange, down for a second day.