Published On: Thu, Apr 14th, 2011

Oil Rises for Second Day After U.S. Gasoline Stocks Drop Most in 12 Years

Oil rose for a second day in New York after a U.S. government report showed gasoline supplies plunged the most in 12 years, increasing speculation demand is rising in the world’s biggest crude-consuming nation.

Futures advanced as much as 0.4 percent after the Energy Department said yesterday that stockpiles fell 7 million barrels last week to 209.7 million, the biggest drop since Oct. 9, 1998. Inventories were forecast to decline 1 million barrels, according to analysts surveyed by Bloomberg News. U.S. crude supplies climbed more than analysts estimated.

“The talk is that this U.S. inventory report saw a spectacular draw in gasoline, and that prompted the buying,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “The bounce is mainly a rebound from the sharp correction of a couple of days ago.”

Crude for May delivery rose as much as 45 cents to $107.56 a barrel and was at $107.47 in electronic trading on the New York Mercantile Exchange at 1:30 p.m. Singapore time. Yesterday, the contract climbed 86 cents to $107.11, the highest settlement since April 11. Prices are up 25 percent from a year ago.

Brent oil for May settlement traded at $122.82 a barrel, down 6 cents, on the London-based ICE Futures Europe exchange. The contract climbed $1.96, or 1.6 percent, to $122.88 yesterday.

The European benchmark traded at a premium of $15.77 a barrel to U.S. futures yesterday. The difference between front- month contracts in London and New York surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the delivery point for New York futures. The spread averaged 76 cents last year.

Gasoline Consumption

Kuwait, OPEC’s fifth-biggest oil producer, resumed crude exports today after the weather improved, said Mohammed al-Ajmi, spokesman for state-refiner Kuwait National Petroleum Co. Port operations were suspended as a sandstorm covered the country for the third time in as many weeks.

“The numbers are supportive for gasoline, but crude inventories continue to increase,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney.

Total U.S. crude inventories rose 1.63 million barrels to 359.3 million last week, the Energy Department said. They were forecast to increase 1 million barrels, the Bloomberg survey shows. Cushing supplies gained 26,000 barrels to 41.9 million, the highest level since at least 2004 when the department began tracking stockpiles at the hub.

Gasoline consumption of the fuel rose the most in more than five months, climbing 3.7 percent to 9.18 million barrels a day, the Energy Department report showed. Gasoline futures for May delivery advanced for a second day, gaining 0.23 cent, or 0.1 percent, to $3.2447 a gallon in New York.

Demand Destruction

“Despite the positive demand signal, the market remained concerned over potential demand destruction due to rising retail gas prices,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in an e-mailed note today.

Refineries operated at 81.4 percent of capacity, down 3 percentage points from the prior week. It was the lowest level since February. A 0.45 percentage-point increase was forecast in the Bloomberg news survey.

Libya’s opposition said it is discussing with allies the possibility of borrowing $2 billion to import food, medicine, fuel and possibly weapons to combat Muammar Qaddafi’s forces. The Libyan conflict is the bloodiest in a wave of uprisings that has toppled leaders in Egypt and Tunisia and spread to Algeria, Bahrain, Iran, Oman, Syria and Yemen.

Syrian activists reported disruptions to phone, Internet and electricity connections in areas where protests have broken out, after authorities vowed to crush what they called a conspiracy against the regime.

Oil prices are likely to remain “high” as the impact on fuel demand from this year’s rally will probably be limited, according to Bank of America Merrill Lynch. Futures may exceed $140 a barrel in the next three months as consumption expands “rapidly” and armed conflict curbs supplies from Libya, according to the Merrill report dated April 12.

Prices in New York also rose yesterday after the Commerce Department said U.S. retail sales climbed in March for a ninth consecutive month, showing the improving job market is helping Americans cope with higher costs for fuel and food.

 

Source : www.bloomberg.com