Crude Oil Rises After Report Showing U.S. Inventory Decline

Nov. 18 (Bloomberg) -- Crude oil rose after the government reported that U.S. crude and fuel supplies dropped along with refinery production and imports.

Oil inventories fell 887,000 barrels to 336.8 million last week, the Energy Department said. Stockpiles were forecast to increase by 300,000 barrels, according a Bloomberg News survey of analysts. Fuel inventories decreased as refiners operated at the slowest pace in more than a year.

“There were draws in crude oil, gasoline and distillates, so the initial numbers looked very bullish,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts.

Crude oil for December delivery rose 44 cents, or 0.6 percent, to $79.58 a barrel on the New York Mercantile Exchange, the highest settlement since Nov. 5. Futures have traded between $74.79 and $82 since Oct. 15. Oil is up 78 percent this year.

“We are still covering the same ground,” said Michael Fitzpatrick, vice president of energy with MF Global in New York. “If the DOE number had been over 4 million like the API, prices would have probably broken through $82 and we would have been off to the races. This number isn’t going to do it.”

Crude oil stockpiles declined 4.37 million barrels to 333.1 million last week, the American Petroleum Institute said in a report yesterday.

“These numbers were disappointing, given what we received from the API last night,” said John Kilduff, partner at Round Earth Capital, a hedge fund that focuses on food and energy- commodity investments. “The market should remain under pressure. The seasonal leader, distillate fuel, didn’t even provide support.”

Imports of crude oil declined 0.9 percent to 8.58 million barrels a day, the report showed. Along the Gulf of Mexico coast imports tumbled 16 percent to 4.28 million as Hurricane Ida disrupted the arrival of shipments.

‘Sound and Fury’

“This looks like a lot of sound and fury about nothing,” Mueller said. “Imports along the Gulf were off a great deal because of the storm, so next week’s report should show a corresponding increase.”

Gasoline inventories declined 1.76 million barrels to 209.1 million in the week ended Nov. 13. The 18 analysts surveyed by Bloomberg News were split over whether stockpiles of the motor fuel had increased or fallen.

“The draw in gasoline was the biggest support, and the largest in absolute terms,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “It came as a complete surprise.”

Gasoline for December delivery climbed 0.65 cent, or 0.3 percent, to end the session at $2.0114 a gallon in New York. It was the highest settlement since Nov. 4.

Refinery Cutbacks

Refineries operated at 79.4 percent of capacity, down 0.5 percentage point from the prior week, leaving units functioning at the slowest pace since September 2008 when hurricanes Gustav and Ike stuck the Gulf. The average rate during the second week of November over the previous five years was 87.9 percent of capacity.

“Even with refineries running at less than 80 percent of capacity, distillate stocks were unable to post more than a token decline,” Evans said. “Demand must be terrible.”

Supplies of distillate fuel dropped 328,000 barrels to 167.4 million last week, the report showed. An 850,000-barrel decline was forecast, according to the median of responses in the Bloomberg News survey.

Total U.S. daily fuel demand averaged 18.6 million barrels in the past four weeks, down 4.1 percent from a year earlier, the report showed. Consumption of distillate fuel averaged 3.59 million barrels, down 11 percent.

‘No Demand’

“Refiners are slowing down output because there is no demand for what they produce,” Mueller said. “Demand should stay low, putting a lid on prices, until we get some extended cold weather.”

Prices also advanced as the dollar weakened against the euro, bolstering the appeal of commodities as an alternative investment. The greenback slipped 0.5 percent to $1.4949 against the common currency, from $1.4876 yesterday.

BNP Paribas SA raised its fourth-quarter price forecast for West Texas Intermediate oil, the U.S. benchmark, to $77 a barrel, from $66 previously, senior oil analyst Harry Tchilinguirian said in a research note today.

Weak Dollar

“Ongoing” U.S. dollar weakness and low interest rates are among the reasons for the change, according to London-based Tchilinguirian. WTI crude will average $81 a barrel next year, BNP said, up from its previous forecast of $78.

Brent crude oil for January settlement rose 50 cents, or 0.6 percent, to end the session at $79.47 a barrel on the London-based ICE Futures Europe exchange.

Oil volume in electronic trading on the Nymex was 511,813 contracts as of 2:58 p.m. in New York. Volume totaled 577,946 contracts yesterday, 3.2 percent higher than the average over the past three months. Open interest was 1.2 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.