Oil Gains a Second Day on Demand Outlook as API Says U.S. Stockpiles Drop

Author: Spencer Ogden
Date posted08/Feb/2012
Author: Spencer Ogden

Oil rose for a second day in New Yorkafter a report showed U.S. stockpiles shrank, signaling increased demand in the world’s biggest crude consumer.

West Texas Intermediate futures climbed as much as 1 percent from the highest settlement in a week. Crude inventoriesfell 4.5 million barrels in the seven days ended Feb. 3, the first drop in three weeks, the American Petroleum Institute said after yesterday’s settlement. Analysts surveyed by Bloomberg News had forecast today’s Energy Department report would showsupplies rose 2.5 million barrels.

“Inventories decreasing are adding to the supply concerns in the market,” said Sintje Boie, an analyst at HSH Nordbank in Hamburg. “Demand is quite strong because of the winter season. There are already supply worries from Iran’s threat to stop exports to Europe.”

Crude for March delivery advanced as much as $1.08 to $99.49 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.46 at 8:54 a.m. London time. Yesterday, it increased $1.50 to $98.41, the highest settlement since Jan. 31. Prices are up 14 percent from a year ago.

Brent oil for March settlement on the London-based ICE Futures Europe exchange rose for a seventh day, the longest run of advances since August. The European benchmark gained as much as 54 cents, or 0.5 percent, to $116.77 a barrel and was at a premium of $17.13 to West Texas grade, down for a second day. The spread closed at $19.02 on Feb. 6, the widest settlement level in three months, and reached $20.70 yesterday, the highest since Oct. 25.

Price Outlook

West Texas Intermediate oil will average $100.40 a barrel this year, according to a forecast from the Energy Department. That’s 15 cents higher than the January estimate, it said yesterday in its monthly Short-Term Energy Outlook.

U.S. gasoline stockpiles rose 4.4 million barrels last week, the American Petroleum Institute report showed. Supplies probably gained 875,000 barrels in today’s government report, according to the median estimate of 10 analysts in the Bloomberg News survey. Distillate-fuel inventories, including diesel and heating oil, climbed 386,000 barrels compared with a projection for an 875,000-barrel decline.

Crude imports dropped 12 percent to 7.8 million barrels a day last week, the lowest since May 20, the API said. The daily intake of products declined 10 percent to 1.5 million barrels, the slowest rate since Jan. 6.

Bollinger Band

The API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

“The API data provided momentum for the price gains,”said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “Front-month prices for West Texas are in a trend-channel pattern, with the range broadly between about $95.50 on the downside and $100.50 on the upside.”

Oil in New York has technical resistance along the middle Bollinger Band on the daily chart, about $99.19 a barrel today, data compiled by Bloomberg shows. Investors tend to sell contracts as prices approach resistance. Futures slipped below the lower band yesterday before settling higher, signaling a rebound from chart support.

Goldman Sachs Group Inc. recommended selling West Texas Intermediate contracts for delivery in May and buying those for June. Rising inventories at the U.S. storage hub in Cushing,Oklahoma, will put pressure on short-term prices, the bank said in a report yesterday.

Crude stockpiles at Cushing, which typically drive price differences between monthly contracts, have increased 2.8 percent this year to 30.1 million barrels, according to the Energy Department.