Oil Surges to 4-Month High in New York After U.S. Supply Report

Crude oil rose to a 4-month high, after a report showing a U.S. inventory increase failed to damp concern about supply shortfalls this summer.

Bloomberg.com
Crude oil rose to a 4-month high, after a report showing a U.S. inventory increase failed to damp concern about supply shortfalls this summer.

Crude-oil supplies gained 3.2 million barrels to 302.6 million last week, the highest since July, according to the Energy Department. Global oil demand will rise 2.5 percent to an average 84.7 million barrels a day this year, according to a report yesterday from the department. Global output will average 84.6 million barrels a day, the report showed.

“It will take more than one weekly report to shift the momentum of this market,” said Phil Flynn, vice president of risk management with Alaron Trading Corp. in Chicago. “It looks like yesterday’s DOE report trumps today’s. We are worried about gasoline supplies this summer, China’s need for more oil and OPEC’s seeming inability to supply enough.”

Crude oil for April delivery rose 76 cents, or 1.4 percent, to $55.35 a barrel at 12:20 p.m. on the New York Mercantile Exchange. Futures touched $55.46 a barrel, the highest intraday price since Oct. 27. Prices are up 53 percent from a year ago.

Oil surged to a record $55.67 a barrel in New York on Oct. 25 because production wasn’t keeping up with global demand, particularly from China.

“Oil’s a commodity,” Lee Raymond, the chief executive of Exxon Mobil Corp., the world’s most valuable company, said today during a presentation to investors and analysts in New York. “It’s hard to find any single commodity that’s maintained very high prices over a very long period of time. That’s not the way commodities work,” he said today.

U.S. gasoline supplies fell 201,000 barrels to 224.3 million barrels last week, the first decline in six weeks, the report showed. Analysts expected a drop of 125,000 barrels, according to the median of responses. U.S. inventories are 11 percent higher than last year.

Gasoline Records

Gasoline for April delivery rose 1.77 cents, or 1.2 percent, to $1.553 a gallon in New York. Futures touched a record $1.5495 a barrel yesterday. Gasoline is 47 percent higher than a year ago.

Retail gasoline has surged with the increase in futures prices. U.S. gasoline pump prices jumped 7.1 cents to an average of $1.999 a gallon in the past week, a four-month high, the Energy Department said March 7.

The department raised its retail gasoline price estimate for this year by 4.6 percent from a month ago to $2.03 a gallon, which would top the record $1.85 set in 2004 in a report yesterday. The department said prices will average $2.15 a gallon in May.

`Close Balance’

“The perception of the world is that supply and demand are in pretty close balance,” Raymond said.

Signs that increasing demand will outstrip supply prompted hedge-fund managers and other speculators last week to make their biggest bet on rising oil prices since June in New York, according to data published by the U.S. Commodity Futures Trading Commission.

“The prices are clearly advancing because of rampant speculation,” said Michael Fitzpatrick, vice president of energy risk management at Fimat USA in New York. “There are new buyers pouring funds into the market. The resolve of these new investors could evaporate quickly, and prices could return to a more sensible level within weeks as the weather warms.”

In London, the April Brent crude-oil futures contract rose 91 cents, or 1.7 percent, to $53.75 a barrel on the International Petroleum Exchange. Prices touched $54.05 a barrel, the highest since the contract was introduced in 1988.