Oil Is Steady After Report Shows Drop in Supplies on West Coast

By Mark Shenk

July 10 (Bloomberg) -- Crude oil was little changed after a U.S. Energy Department report showed that an inventory drop occurred mostly on the West Coast, where the distribution system is isolated from the rest of the country.

Nationwide oil supplies declined 5.84 million barrels to 293.9 million barrels last week, the report showed. Stockpiles on the West Coast, known as PADD 5, fell 4.82 million barrels to 53.6 million. Total inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, rose.

``The decline was mostly in PADD 5, so the market reaction was muted,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``The West Coast is detached from the rest of the country so any impact is mitigated.''

Crude oil for August delivery fell 31 cents to $135.74 a barrel at 8:06 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, futures rose 1 cent to settle at $136.05 a barrel. Prices are up 88 percent from a year ago. Oil touched a record $145.85 a barrel on July 3.

The department released its weekly report on inventories yesterday in Washington.

Brent crude oil for August settlement rose 15 cents to settle at $136.58 a barrel yesterday on London's ICE Futures Europe exchange. Prices climbed to a record $146.69 on July 3.

Nigerian Resumption

Prices retreated from overnight highs after Royal Dutch Shell Plc said it resumed contracted deliveries of crude oil from Nigeria's offshore Bonga field that was shut after a militant attack last month.

Shell, Europe's biggest oil producer, lifted a so-called force majeure declaration on Bonga exports yesterday, Shell spokesman Rainer Winzenried said in a telephone interview. Force majeure is a legal clause which allows producers to miss contracted deliveries because of circumstances beyond their control.

Winzenried declined to comment on the loading schedule or current output levels. Bonga is producing ``enough to fulfill contracts,'' he said.

Shell stopped pumping oil from Bonga on June 19 after militants attacked the production and storage vessel at the deepwater field, 120 kilometers (75 miles) off the coast of Nigeria. Output resumed on June 24.

Nigerian output has been slashed over the past two years because of attacks on facilities. Nigeria produces low-sulfur, or sweet, crude oil, prized by U.S. refiners because of the proportion of high-value gasoline and distillate fuel it yields.

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