Oil Rises for Seventh Day After U.S. Gasoline Stocks Tumble

Oct. 16 (Bloomberg) -- Crude oil rose for a seventh day to $78 a barrel after jumping more than 3 percent yesterday on an unexpected plunge in U.S. gasoline and distillate stocks.

Oil headed for its third weekly gain after inventories of the motor fuel tumbled 5.23 million barrels last week, almost five times the decline forecast by analysts and the biggest in a year according to Energy Department data. Gasoline output slumped 10 percent, the most in 13 months, as refiners slashed operating rates to their lowest since April.

The stockpile plunge “completely reverses the cumulative effect of the previous two weeks of softer data,” Barclays Capital analyst Paul Horsnell said in a report. “The transition to a $70 to $80 range is now in full cry.”

Crude oil for November delivery rose 39 cents, or 0.5 percent, to $77.97 a barrel in after-hours electronic trading the New York Mercantile Exchange at 8:10 a.m. in Singapore. It earlier reached $78, the highest since Oct. 14, 2008.

The contract jumped 3.2 percent to $77.58 yesterday. Prices have gained 8.3 percent this week after the International Energy Agency and OPEC raised their 2010 demand forecasts and as resurgent equity markets emboldened investors and the sliding dollar steered funds into physical assets.

The IEA’s Oct. 9 report seems to be responsible for much of the “recent positive change in sentiment,” Barclays Capital said. Prices are likely to climb “in relatively gentle upwards transitions in bands, rather than being primed yet for a more explosive breakout.”

U.S. Inventories

U.S. gasoline supplies fell to 209.2 million barrels last week, leaving them 4.3 percent higher than the five-year average for the period, the department said yesterday. Refineries cut output of the fuel by 964,000 barrels a day to 8.45 million, the lowest since September 2008.

“Utilization fell a great deal and the gasoline production number really grabs you by the neck,” Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut, said yesterday. “This will obviously eat into stocks.”

Refiners often idle units for repairs and upgrades in October as gasoline demand drops and before heating-oil use increases with the northern hemisphere winter.

“We are in the shoulder period,” Jan Stuart, global oil analyst at Macquarie Group Ltd. in New York, said on Bloomberg Television yesterday. “We should be building crude stocks and we should be drawing products.”

Crude Supplies

Inventories of crude oil in the U.S. rose 334,000 barrels to 337.8 million, 10 percent more than a year earlier, the department said. Supplies were forecast to increase by 1 million barrels, according to the median of 14 analyst responses in the Bloomberg News survey. Oil imports fell 4 percent to 8.73 million barrels a day, the lowest in three months.

Supplies of distillate fuel, including heating oil and diesel, fell for the first time in eight weeks to 170.7 million barrels, 34 percent more than a year earlier, according to the report. Stockpiles in the week ended Oct. 2 were the highest level since January 1983.

While U.S. gasoline demand this month roughly matches the record levels seen two years ago, distillate demand is about 15 percent lower, Barclays said.

“That is an enormous disparity in terms of the health of the demand-side,” the bank said. “The point of maximum darkness must almost be here for distillates.”

Brent crude for December settlement climbed 36 cents, or 0.5 percent, to $76.59 a barrel, having jumped 3.2 percent yesterday. The November contract expired yesterday, rising 1.9 percent to $74.45 a barrel.