Crude Oil Trades Above $76 After Gaining on Inventory Declines

Dec. 24 (Bloomberg) -- Oil traded above $76 a barrel in New York, after gaining the most in a month on a report showing a larger-than-expected decline in U.S. stockpiles.

Oil rose 3.1 percent yesterday after the Department of Energy said supplies had their biggest drop since September. Confidence among U.S. consumers increased in December for the first time in three months as the pace of job cuts slowed.

“The story has been the big draw down in oil products overnight,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said by phone. “Around $75 is a reasonable mark given the fundamentals. I don’t think we’ll see too much more investor interest at this level.”

Crude oil for February delivery traded at $76.68, up 0.1 percent, in electronic trading on the New York Mercantile Exchange at 11:42 a.m. Sydney time. Oil increased $2.27 to $76.67 yesterday, the highest settlement since Dec. 1 and the biggest gain since Nov. 16. Prices are up 72 percent this year.

Oil may reach $90 in 2010, driven by Chinese demand, Nick Raffan, an analyst at Fat Prophets, said in an interview today in Sydney. “China’s growth rates are startling,” he said.

Futures have traded between $68.59 and $82 since Oct. 6.

The market will trade near the top of the range at the start of 2010, Brison Bickerton, chief energy strategist at RBS Sempra Commodities in Stamford, Connecticut, said in a Bloomberg Television interview. “We look for a price of $78 to $80 in the first half of the year. We believe that as fundamentals tighten up in the second half of the year, oil can press higher to $85.”

‘Surprise’ Drop

Supplies fell 4.84 million barrels to 327.5 million last week, the report showed. Inventories were forecast to decrease by 1.6 million barrels, according to a Bloomberg News survey. Stockpiles of gasoline and distillate fuel, a category that includes heating oil and diesel, dropped as demand climbed.

“These numbers took analysts by surprise,” said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. “We are now set to march up to the $80 level. It looks like the consumer is coming back even if the economic growth isn’t as strong as people wanted.”

The Reuters/University of Michigan final index of consumer sentiment rose to 72.5 from 67.4 in November. The figure was lower than the preliminary 73.4 reading, reported on Dec. 11.

Imports of crude to the U.S. fell 0.8 percent to 7.71 million barrels a day, the lowest since September 2008 when ports were shut because of hurricanes Gustav and Ike. Fuel imports slipped 8 percent to 2.42 million barrels a day, the lowest since October.

Inventories of crude oil last week were 5.3 percent higher than the five-year average for the period, the department said. Supplies of gasoline and distillate fuel were also above average.

‘Silly Season’

Refineries operated at 80 percent of capacity last week, little changed from the prior week. Analysts surveyed by Bloomberg News forecast a 0.4 percentage-point gain.

Gasoline stockpiles fell 883,000 barrels to 216.3 million, the first decline in five weeks. A 1 million-barrel increase was forecast, according to the median of 16 analyst responses in the Bloomberg News survey.

Distillate supplies tumbled 3.03 million barrels to 161.3 million, the biggest drop since April. Analysts forecast a 2 million-barrel decline.

Traders expect reduced volumes during the final two weeks of the year as investors take holidays. There will be no trading tomorrow for Christmas and on Jan. 1 for New Year’s Day.

“This is the silly season for the oil market,” Brodrick said. “Volume is so light that it doesn’t take much to push the market around.”

Oil also advanced yesterday as the dollar dropped against the currencies of the U.S.’s biggest trading partners. A weaker dollar increases the appeal of commodities to investors.

Brent crude oil for February settlement rose $1.99, or 2.7 percent, to end the session at $75.45 a barrel on the London- based ICE Futures Europe exchange yesterday. It was the highest close since Dec. 7.