Crude Oil Rises Above $83 After Unexpected U.S. Inventory Drop
By Mark Shenk
Oct. 11 (Bloomberg) -- Crude oil rose above $83 a barrel in New York for the first time this month after an Energy Department report showed an unexpected decline in U.S. inventories.
Stockpiles fell 1.67 million barrels in the week ended Oct. 5, the report showed. A 1.08 million-barrel gain was expected, according to a Bloomberg News survey. The International Energy Agency reported today that supplies of crude oil and petroleum products in the developed world fell last month.
``This is a sensible response to plunging crude-oil inventories,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``With the stock market making new highs, worries about the economy and demand slowing are fading. The global supply picture is tight and it doesn't look like it will improve anytime soon.''
Crude oil for November delivery rose $1.78, or 2.2 percent, to settle at $83.08 a barrel at 2:45 p.m. on the New York Mercantile Exchange, the second-highest closing price since the contract was introduced. Futures reached $83.67, the highest intraday price since Sept. 28. Futures touched $83.90 a barrel on Sept. 20, the highest since trading began in 1983.
Heating oil for November delivery increased 3.01 cents, or 1.4 percent, to close at $2.2473 a gallon in New York. Futures touched $2.2711, the highest since trading began in 1978. Gasoline for November delivery climbed 3.3 cents, or 1.6 percent, to settle at $2.0666 a gallon.
U.S. stocks rallied early today, sending benchmark indexes to records for a second time this week, after a government trade report suggested economic growth is accelerating.
Fuel Stockpiles
Supplies of distillate fuels, a category that includes heating oil and diesel, declined 563,000 barrels to 135.3 million last week, the report showed. Gasoline stockpiles rose 1.68 million, according to the department.
The department released its weekly report on inventories today, a day later than usual because of the Columbus Day holiday on Oct. 8.
``A lot of what we are seeing is just momentum,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``Today's report was primarily neutral, which offered no reason for the bulls to stop buying. The dollar is being hit pretty hard as well, which is spurring a commodity rally.''
The euro traded as high as $1.4241 today, the highest since reaching a record $1.4282 on Oct. 1.
Commodity Prices
Energy and precious metals futures rose because a decline in the value of the dollar against the euro enhanced the appeal of commodities as an investment. Commodities often move in the opposite direction of the U.S. currency. A lower dollar makes commodities denominated in the U.S. currency cheaper in countries using other currencies.
In U.S. dollars, West Texas Intermediate, the New York- traded crude-oil benchmark, is up 36 percent so far this year. Oil is up 26 percent in euros, 31 percent in British pounds and 35 percent in yen.
``There is no top if the dollar continues to deteriorate,'' said Tom Knight, trading director at Truman Arnold Cos., an independent wholesaler in Texarkana, Texas. ``Why can't you go to $90, $100, or $120? At some point it has an impact on demand, but these impacts have been so slow.''
Saudi Aramco, the world's largest state oil company, will for the first time in a year supply Asian customers with the full oil volumes in November as agreed under annual contracts, refinery officials said.
Saudi Arabia is raising exports after the Organization of Petroleum Exporting Countries agreed in September to boost output by 500,000 barrels a day. OPEC, which produces about 40 percent of the world's oil, increased production to help the economy.
Lack of Confidence
The IEA, an adviser to 26 industrialized nations, said oil prices above $80 a barrel are the result of a lack of confidence stockpiles will be replenished during the winter, when global demand peaks.
``The price reflects what's going to happen in the future,'' Lawrence Eagles, lead author of the report, said in a telephone interview today. ``Stockpiles are tighter than they were. People want to know if it is tight in the fourth quarter, are they going to be replenished in the first quarter?''
Turkish Prime Minister Recep Tayyip Erdogan ordered preparations for a possible military strike on bases of the Kurdistan Workers' Party in Iraq. Turkey recalled its ambassador to the U.S. today after a congressional panel voted to call the slaughter of Armenians by Ottoman Turks around the time of World War I a genocide.
Turkey-Iraq Tension
``Concerns about the potential for armed conflict along the Turkey-Iraq border helped push prices higher,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``It is unlikely to result in a cut in the flow of oil but it's one more problem in an unstable region.''
Iraq resumed shipments from the northern export route that ends at Turkey's Ceyhan export terminal. Iraq holds the world's third-biggest crude-oil reserves, according to BP Plc.
Brent crude oil for November settlement rose $1.55, or 2 percent, to close at $80.15 a barrel on the London-based ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at [email protected] .
Last Updated: October 11, 2007 15:38 EDT
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