Crude Oil Rises as U.S. Petroleum Inventories Decline More Than Forecast

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Crude oil climbed after a U.S. government report showed stockpiles plunged the most since 2002 as imports tumbled and refineries bolstered fuel output.

Oil rose 0.4 percent after the Energy Department said inventories fell 9.85 million barrels last week to 346 million. The price increase was tempered as the stockpile decline was concentrated on the Gulf Coast. Supplies were forecast to drop by 2.5 million barrels, according to a Bloomberg survey. Imports decreased 15 percent to the lowest level since September 2008.

“The crude numbers are shocking,” said Andre Julian, chief financial officer and senior market strategist at OpVest Wealth Management in Irvine, California. “A near-term shortage of crude in the U.S. is forming.”

Crude for January delivery rose 34 cents to $88.62 a barrel on the New York Mercantile Exchange, the highest settlement price since Dec. 7. Futures are up 25 percent from a year ago.

Brent crude oil for January settlement increased 99 cents, or 1.1 percent, to end the session at $92.20 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since Oct. 1, 2008.

Imports of crude oil slipped to 7.69 million barrels a day, the report showed. Fuel imports dropped 11 percent to 2.36 million barrels a day.

U.S. imports may drop in the weeks ahead after Brent’s premium to New York futures climbed to $3.58 a barrel, the strongest level since Sept. 21.

“It’s fascinating that the U.S. had a nearly 10 million- barrel drop in supply and it’s Brent that rallies,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The drop primarily occurred because of decisions made by refiners, not because of a shortage of oil.”

Above Average

Supplies in the week ended Dec. 10 were 7.2 percent higher than the five-year average for the period, the department said.

Stockpiles along the Gulf Coast, which holds almost half of U.S. refinery capacity, dropped 9.02 million barrels to 173.4 million. Some localities in the region levy taxes on the amount in storage at year’s end.

“This number isn’t as bullish as it first appeared,” said Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania. “The draw was on the Gulf Coast where refineries delay deliveries because they want to dodge their tax bills, which isn’t bullish. Given the time of year and where it occurred I can’t get that excited.”

Cushing Inventories

Inventories at Cushing, Oklahoma, the delivery point for New York futures, increased 982,000 barrels to 35.9 million, the highest level since August.

“There were builds in Cushing and elsewhere and the import number dropped as supplies stayed out at sea,” Schork said. “There should be additional draws next week and the following week. We’ll then see all of the supply come back in January.”

Gasoline supplies rose 809,000 barrels to 214.8 million last week, the report showed. They were forecast to climb 2 million barrels, according to the median of 17 responses in the Bloomberg News survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, increased 1.09 million barrels to 161.3 million.

“The much bigger-than-expected draw was mostly due to end- of-year inventory management at refineries,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “There was a pop right after the report’s release but I don’t see there being a big reaction.”

Refineries operated at 88 percent of capacity, the most since September.

Fuel Consumption

Total fuel consumption climbed 1 percent to 20.2 million barrels a day, the highest level since January 2009. Gasoline demand increased 1.9 percent to 9.35 million barrels a day.

“The rising demand is a sign that we’re seeing renewed economic activity,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “This means that my target of $105 oil next year will be reached sooner rather than later.”

Crude also climbed after U.S. industrial production increased more than forecast in November, signaling factories will support economic growth in the world’s biggest oil- consuming country.

Output at factories, mines and utilities rose 0.4 percent after a revised 0.2 percent decrease in October, figures from the Federal Reserve showed today in Washington. Economists forecast a 0.3 percent gain, according to the median of 75 projections in a Bloomberg News survey.

Manufacturing in the New York region rebounded more than forecast in December after contracting for the first time in more than a year, a report from the New York Fed also showed today. The bank’s general economic index climbed to 10.6 from minus 11.1 in November. Readings greater than zero signal growth in New York, northern New Jersey and southern Connecticut.

Oil volume on the Nymex was 702,497 contracts as of 3:11 p.m. in electronic trading in New York. Volume totaled 602,429 contracts yesterday, 12 percent below the average of the past three months. Open interest was 1.38 million contracts.