Crude Oil Falls as U.S. Stockpiles Gain on Deepening Recession

By Christian Schmollinger

Jan. 23 (Bloomberg) -- Crude oil fell after U.S. stockpiles rose more than four times forecast last week, raising concern of an oversupply as the global recession deepened.

Supplies of crude oil in the U.S. rose 6.1 million barrels to 332.7 million last week, the highest since August 2007, the Energy Department said yesterday. Stockpiles were forecast to climb by 1.4 million barrels, according to a Bloomberg News survey. Gasoline and distillate fuels inventories also gained more than expected as refiners ran at 83.3 percent of capacity.

“At the end of the day, if they are stockpiling, it just means demand is weak,” said Mark Pervan, a senior commodity strategist at Australia and New Zealand Banking Group Ltd. in Melbourne. “The inventory numbers confirm this. Refiners simply aren’t operating. At this time of year they should be up around 94 or 95 percent.”

Crude oil for March delivery fell as much as $1.08, or 2.5 percent, to $42.59 a barrel in electronic trading on the New York Mercantile Exchange. It was at $42.95 a barrel at 10:28 a.m. Singapore time.

Prices are down 3.9 percent since the end of December and 51 percent lower than a year ago. Yesterday, crude oil futures rose 12 cents to settle at $43.67 a barrel.

Brent crude oil for March settlement fell as much as 73 cents, or 1.6 percent, to $44.66 a barrel on London’s ICE Futures Europe exchange. The contract rose 37 cents, or 0.8 percent, to settle at $45.39 a barrel yesterday.

Falling Demand

Fuel consumption in the U.S., the world’s biggest oil consumer, during the four weeks ended Jan. 16 averaged 19.4 million barrels a day, down 4.7 percent from a year earlier, the Energy Department report showed.

China, the world’s second-largest oil user, is in a recession despite government statistics yesterday showing the world’s third-largest economy expanded in the fourth quarter from a year earlier, according to Nouriel Roubini, the New York University professor who predicted last year’s economic crisis.

Unlike the U.S. and western Europe, China’s figures on gross domestic product measure growth from the same quarter a year ago rather than the previous three months. The year-on-year figures fail to capture the economy’s slowdown at the end of 2008 because growth was so high in the preceding quarters, Roubini, a professor at NYU’s Stern School of Business, wrote in a note yesterday on his Web site.

The government said fourth-quarter gross domestic product increased 6.8 percent from a year earlier.

Oil Processing

Crude oil processing in the country fell 7.4 percent to 27.16 million tons in December, the biggest drop since at least 2003, China Mainland Marketing Research Co., which compiles data for the National Bureau of Statistics in Beijing, said yesterday.

Supplies at Cushing, Oklahoma, where oil traded on Nymex is stored, climbed 0.7 percent to 33.2 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location.

Stockpiles in the Mid-Continent, known as PADD 2, increased 1.7 percent to 82.2 million barrels, the highest since the week ended June 26, 1998, when oil was trading at about $14 a barrel. Oklahoma is in PADD 2.

Gasoline inventories increased 6.48 million barrels to 220 million, the Energy Department said. Stockpiles were forecast to climb by 1.8 million barrels, according to the Bloomberg News survey. Refineries reduced operating rates, or runs, by 2 percentage points as fuel consumption tumbled.

U.S. Gasoline

Gasoline futures for February delivery was at $1.08 a gallon, down 1.34 cents, in Nymex trading at 10:11 a.m. Singapore time. The contract dropped 8.04 cents to $1.0934 a gallon yesterday, the lowest settlement since Jan. 12. Futures are up 7.1 percent for the year and are 52 percent lower than a year ago.

The price of oil for delivery in April is $2.16 higher than for March, and December futures are up $10.23 from the front month. This structure, in which the subsequent month’s price is higher than the one before it, is known as contango, and is often an indicator of oversupply.

“It’s still a very steep curve,” said ANZ Banking’s Pervan. “There’s no place to store this stuff so people are putting it into the very visible inventories.”

Companies including Citigroup Inc.’s Phibro LLC, Royal Dutch Shell Plc and BP Plc have stored oil on tankers, as the contango allows them to profit from hoarding crude.

Refineries operated at 83.3 percent of capacity last week, the Energy Department report showed, the lowest for the week since 1991. Analysts forecast that there would be a 0.5 percentage point drop.

Distillate supplies, which include heating oil and diesel, rose 790,000 barrels to 145 million barrels. Stockpiles were forecast to climb by 500,000 barrels.

Heating oil for February was at $1.3368 a gallon, down 1.18 cents, at 10:06 a.m. Singapore time. It fell 3.74 cents, or 2.7 percent, to settle at $1.3486 a gallon in New York yesterday.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.