Oil Trades Below $35 After Industry Report Shows Stockpile Gain

By Christian Schmollinger

Feb. 19 (Bloomberg) -- Crude oil traded below $35 a barrel in New York after an industry-funded report showed that U.S. stockpiles climbed amid falling fuel demand.

The American Petroleum Institute said yesterday that inventories rose 1.6 million barrels last week to 345.8 million barrels. An Energy Department report out today also is expected to show stockpiles gained. U.S. fuel usage fell 3.1 percent to an average 19.5 million barrels in January, the lowest for the month in seven years, API said.

“Total demand for oil products is getting lower and there is no sign of recovery,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge Group in Tokyo. “We still don’t have any bullish signs to buy.”

Crude oil for March delivery was at $34.63 a barrel, up 1 cent, at 9:37 a.m. Singapore time on the New York Mercantile Exchange. Yesterday futures fell 31 cents, or 0.9 percent, to settle at $34.62 a barrel. Prices are down 22 percent this year.

March trading ends tomorrow. The more-active April contract was at $37.56 a barrel, up 15 cents, at 9:37 a.m. Singapore time. It yesterday dropped $1.13, or 2.9 percent, to end the session at $37.41 a barrel.

Brent crude oil for April settlement was at $39.91 a barrel, up 36 cents, on London’s ICE Futures Europe exchange at 9:35 a.m. Singapore time. It yesterday declined $1.48, or 3.6 percent, to $39.55 a barrel, the lowest settlement since Dec. 26.

Prices fell yesterday on signs the recession is deepening in the U.S., the world’s largest oil consumer, raising concerns of falling demand.

Housing Decline

Housing starts plunged 17 percent last month to an annual rate of 466,000, lower than projected and the fewest houses on record, according to figures yesterday from the Commerce Department in Washington. A report from the Federal Reserve showed industrial output sank in January for the sixth time in seven months.

The Energy Department report may show that U.S. stockpiles increased 3.2 million barrels last week, according to a Bloomberg News survey of analysts. That would be the 19th time out of 21 weeks inventories climbed.

The API said on Feb. 10 that U.S. stockpiles fell 1.99 million barrels in the week ending Feb. 6. The Department of Energy followed on Feb. 11 with a report that said inventories gained 4.7 million barrels over the same period.

Prices for delivery in future months are higher than for earlier ones, a situation known as contango, allowing buyers to profit from hoarding oil. This has led to record stockpiles at Cushing, Oklahoma, where New York-traded West Texas Intermediate crude is delivered.

The gain in Cushing supplies has pushed the WTI contract into a discount with Brent since December.

‘WTI Misleading’

“This first month WTI contract is misleading at the moment,” said Newedge’s Hasegawa. “We need to start seeing these inventories decrease, especially around Cushing.”

Gasoline supplies in the U.S. probably declined 500,000 barrels in the week ended Feb. 13, according to the median of 16 responses in the Bloomberg News survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, dropped 1.5 million barrels, the survey showed.

The Energy Department is scheduled to release its weekly report today at 11 a.m. in Washington, a day later than usual because of the Presidents Day holiday.

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