Crude Oil Rises After Report Shows Drop in U.S. Oil Stockpiles

Jan. 28 (Bloomberg) -- Oil rose after a U.S. government report showed inventories of crude unexpectedly fell last week and some investors took the view that a drop below $74 a barrel made futures attractive to buy.

Oil pared yesterday’s decline after the Energy Department said U.S. crude supplies shrank 3.89 million barrels, or 1.2 percent, to 326.7 million. They were forecast to rise 1.5 million barrels, according to the median of 19 responses by analysts in the Bloomberg News survey.

“We had a drop in crude stocks, which is definitely good,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. Oil prices “in the mid-to-high $70s is going to be well supported, especially because most people expect the market balance to tighten over the period ahead,” he said.

Crude oil for March delivery gained as much as 41 cents, or 0.6 percent, to $74.08 a barrel in electronic trading on the New York Mercantile Exchange. It was at $73.96 at 8:40 a.m. Singapore time. Yesterday, the contract fell $1.04 to $73.67, the lowest settlement since Dec. 21.

Futures had fallen 1.4 percent yesterday after gasoline supplies climbed 1.99 million barrels to 229.4 million last week, the highest level since March 2008, the Energy Department report said. Distillate stockpiles, a category that includes heating oil and diesel, rose 358,000 barrels.

Refinery Rates

Refineries ran at 78.5 percent of capacity, little changed from 78.4 percent in the week ended Jan. 15. That was the lowest level since at least 1989, apart from instances when hurricanes affected Gulf Coast capacity.

Crude oil has dropped 11 percent since Jan. 8 amid concern that the U.S. will limit trading by banks and China will take more steps to cool its economy. Gains in the dollar have also reduced the appeal of commodities as an alternative investment.

The dollar traded at $1.4027 per euro at 11:33 a.m. in Sydney, from $1.4024 yesterday.

Brent crude for March settlement dropped $1.05, or 1.4 percent, to $72.24 a barrel on the London-based ICE Futures Europe exchange yesterday.