Oil Rises on U.S. Inventory Forecasts, Texas Terminal Shutdown

By Mark Shenk

Sept. 24 (Bloomberg) -- Crude oil rose on forecasts that a government report will show U.S. oil and fuel inventories dropped, and after an oil terminal in Texas was shut by a fire.

Crude-oil supplies probably dropped for a fifth week, according to a Bloomberg News survey of analysts. Kinder Morgan Energy Partners LP shut its Pasadena terminal in Texas, which connects refineries from along the Gulf of Mexico coast to pipelines serving the eastern U.S, after the blaze yesterday.

``Traders are positioning before the storage report, which is expected to show a substantial drawdown in supplies,'' said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``We are seeing tightness in physical markets along the Gulf. In this climate the market is sensitive to any loss of supply.''

Crude oil for November delivery rose $2.54, or 2.4 percent, to $109.15 a barrel at 9:01 a.m. on the New York Mercantile Exchange. Prices are down 26 percent from the record $147.27 a barrel reached on July 11.

Yesterday, oil fell 2.5 percent to $106.61 a barrel as U.S. lawmakers debated a $700 billion government bailout plan for financial companies.

U.S. crude-oil inventories probably declined 2.5 million barrels from 291.7 million barrels last week after hurricanes Gustav and Ike closed Gulf of Mexico production facilities, according to the median of 12 responses the Bloomberg survey.

Gasoline stockpiles probably fell 3.6 million barrels from 184.6 million barrels the week before, the survey showed. Supplies of distillate fuel, including heating oil and diesel, probably fell 1.5 million barrels from 129.6 million barrels.

The Energy Department's inventory report is due to be released at 10:35 a.m. in Washington.

`Trading on Fundamentals'

``Oil is coming out from the shadow of the financial crisis and trading on fundamentals,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. ``It's DOE day and we expect that the report will reflect the slow return of production in the Gulf after the hurricanes and a cutback of OPEC production.''

The Organization of Petroleum Exporting Countries will supply 32.6 million barrels of crude a day this month, 800,000 barrels a day less than in August, according to preliminary estimates from consultants PetroLogistics Ltd. The group, which provides more than 40 percent of global supply, resolved at a Sept. 10 meeting to stick more closely to its official quotas.

Terminal Fire

Kinder Morgan's Pasadena plant is part of the company's Houston complex, taking oil products from refineries in Houston, Texas City, Corpus Christi, Baytown and Sweeny and pumping them into the Colonial, Teppco, Explorer and Magellan pipeline systems, according to a diagram on the company's Web site.

One employee was injured in the fire, which started at about 10:30 p.m. local time yesterday in a manifold where two pipelines connect, spokeswoman Emily Thompson said in a telephone interview from Houston today. The fire has been brought under control and operations will resume later today, she said.

The Pasadena site, along the Houston Ship Channel, has a storage capacity of 15.2 million barrels in 117 tanks.

Brent crude oil for November settlement increased $2.40, or 2.3 percent, to $105.48 a barrel on London's ICE Futures Europe exchange.

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