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Oil Gains As Supplies Decline More Than Expected

By on August 16, 2012

Oil traded near the highest close since May after U.S. stockpiles dropped to the lowest in four months and China signaled it may take more steps to boost growth in the world’s second-biggest economy.

Futures were little changed after climbing 1 percent yesterday. Inventories shrank 3.7 million barrels and total oil use reached the highest level in nine months last week, the Department of Energy said in a report. Slowing inflation gives China more room to adjust monetary policy, Chinese Premier Wen Jiabao said, according to state radio. Israel’s ambassador to the U.S. said his country would be willing to strike Iran’s nuclear facilities.

“The key thing is the U.S. inventory report and some expectations in the market for stimulus in China, Europe and the U.S.,” said Victor Shum, the managing director of IHS Consulting in Singapore. “Also adding support to prices are comments from Israel that they will strike Iran.”

Oil for September delivery gained 2 cents to $94.35 a barrel in electronic trading on the New York Mercantile Exchange at 2:05 p.m. in Singapore. It earlier rose as much as 28 cents, or 0.3 percent. Yesterday’s settlement at $94.33 was the highest since May 14. Prices are down 4.5 percent this year.

Brent crude for September settlement, which expires today, rose 11 cents to $116.36 after climbing 2 percent yesterday on the London-based ICE Futures Europe exchange. The more actively traded October contract was at $114.41. Brent’s premium to WTI was $22 a barrel after closing yesterday at $21.92, the highest since October.

Inventory Drawdown

Oil inventories dropped to 366.2 million barrels, a four- month low. Analysts surveyed by Bloomberg had forecast a decline of 1.5 million. Petroleum consumption jumped 5.7 percent to 20 million barrels a day, the most since Nov. 4, led by a 5.3 percent gain in gasoline demand.

Gasoline stockpiles fell 2.37 million barrels to 203.7 million. Distillate supplies, which include heating oil and diesel, rose 677,000 to 124.2 million. The refinery utilization rate was unchanged at 92.6 percent.

“One of the drivers would have been the continued drawdown in U.S. inventories,” said David Lennox, a resource analyst at Fat Prophets in Sydney. Data from China showing easing inflation, meanwhile, “does give them the opportunity to stimulate their internal demand and that would have potential to push up oil prices.”

Israel would be willing to strike Iran, even if doing so only delayed its ability to produce nuclear weapons for a few years, Israeli Ambassador to the U.S. Michael Oren said yesterday. The country’s leaders have stressed this month that time is running out for a diplomatic solution to the nuclear program that it regards as an existential threat.

Middle East

Concern that Middle East tension will disrupt supplies from a region responsible for about one-third of the world’s crude production helped oil advance 7.1 percent in August.

Tropical Depression Eight churned in the North Atlantic about 550 miles (885 kilometers) east-southeast of Bermuda, where it’s currently no threat to land, according to the U.S. National Hurricane Center in Miami.

The system has top winds of 35 miles per hour, below the 39 miles per hour threshold required to be classified as a tropical storm. It’s moving north-northwest at 17 mph, the agency said in anadvisory shortly before 11 p.m. New York time yesterday.

Six named storms have formed this year including Hurricane Ernesto, which struck Mexico last week, killing at least two people and causing widespread flooding. The Atlantic season runs from June 1 to Nov. 30 and U.S. forecasters expect 12 to 17 storms to form in the basin.

 

Source: Bloomberg