Crude oil rose as U.S. inventories dropped for the first time in 10 weeks

U.S. stockpiles fell 1.8 million barrels in the week ended April 15, the U.S. Energy Department reported. Analysts expected an increase of 1.4 million barrels, according to the median forecast in a Bloomberg survey. Imports fell to 9.7 million barrels a day, the lowest since February. Refineries operated at 91.8 percent of capacity, a 0.8 percentage point increase.

“The decline in imports and a slight uptick in refinery runs sent inventories lower,” said Marshall Steeves, an analyst with Refco Group Inc. in New York. Rising prices for Brent crude oil in London may be limiting U.S. imports, he said. “Brent is no longer cheaper than oil in New York.”

Crude oil for June delivery rose 23 cents, or 0.4 percent, to $53.80 a barrel at 1:15 p.m. on the New York Mercantile Exchange. The May contract, which expires today and is less active than June, was up 11 cents at $52.40. New York Prices are down 9 percent since touching $58.28 on April 4, which was the highest since the contract began in 1983.

The May contract dropped near $50 four sessions in a row before rallying almost $2 yesterday.

“We bottomed out at $50 and when it became clear that the May contract wasn’t going to move lower prices began to rise,” said Justin Fohsz, a broker at Starsupply Petroleum Inc. in Englewood, New Jersey. “This is a continuation of yesterday’s rally.”

Brent and WTI

In London, the June Brent crude-oil futures contract rose 48 cents, or 0.8 percent, to $53.42 a barrel on the International Petroleum Exchange.

West Texas Intermediate, or WTI, is the benchmark U.S. crude oil and the basis for New York futures. Brent, named for a field in the North Sea, is the European benchmark.

“There’s too much WTI in the mid-continent and not enough North Sea oil in Europe,” said Adam Sieminski, an oil strategist at Deutsche Bank AG in London. “There has been a big rise in Canadian production, leading to a lot of growth in mid-continent supply. In the North Sea there was a lot of maintenance in January and February, leading to a shortage.”

Crude oil supplies in states along the Gulf of Mexico rose 1.4 million barrels to 170.5 million, the highest since June 2002. The region is home to more than half the nation’s oil storage and about half of its refining capacity.

Supplies on the U.S. West Coast fell 3.5 million barrels to 51.4 million, or more than the entire decline in nationwide inventories last week. The West Coast oil market is isolated from other parts of the U.S., making it difficult of supplies to move between it and other regions.

Fuel Demand

The inventory reports may boost concern that global oil production and refinery output won’t keep up with rising fuel demand spurred as economies grow in China and the U.S. China grew 9.5 percent in the first quarter as industrial production increased 16 percent, the Chinese government said today.

U.S. gasoline inventories fell 1.5 million barrels, more than the 275,000-barrel decline analysts predicted.

“I don’t see any evidence that demand is being held back because of high prices,” Fohsz said. “There are plenty of SUVs on the road.”

Higher output from the Organization of Petroleum Exporting Countries has lifted crude oil inventories 10 percent since the beginning of the year, even with the decline last week.

Prices are unlikely to top $100 a barrel, as suggested by a Goldman Sachs Group Inc. report last month, because of increased OPEC output, Qatar’s Oil Minister Abdullah bin Hamad al-Attiyah said today.

`Balanced Market’



“The market is very balanced,” the minister told reporters in Paris. “There is more oil now in the market than we expected.”

OPEC raised output to 29.9 million barrels a day in March, up 5.2 percent from a year earlier, according to data compiled by Bloomberg. The group raised its output target by 500,000 barrels on March 16 at a meeting in Isfahan, Iran.

Another increase of 500,000 barrels, which was proposed at the March meeting, may not happen before the group convenes again on June 15 in Vienna, Al-Attiyah said. Qatar believes that oil prices of $40 to $50 a barrel are reasonable for producers and consumers, he said.

– With reporting by Maher Chmaytelli in Paris. Editor: Dieterich.

To contact the reporter on this story:
Mark Shenk in New York at mshenk1@bloomberg.net.

To contact the editor responsible for this story:
Robert Dieterich at rdieterich@bloomberg.net.

Last Updated: April 20, 2005 13:16 EDT

Bloomberg