Oil Rises After Government Shows Smaller Supply Gain Than API

By Mark Shenk

April 9 (Bloomberg) -- Crude oil rose for a second day, extending yesterday’s gains that followed a U.S. government report showing a smaller inventory gain than industry figures.

Supplies increased 1.65 million barrels to 361.1 million last week, the highest since July 1993, the Energy Department said. Stockpiles were forecast to climb by 1.5 million barrels, according to a Bloomberg News survey. The industry- funded American Petroleum Institute said April 7 stockpiles jumped 6.94 million barrels to the highest since 1990.

The inventory build “wasn’t anywhere near as large as in the API report, which is giving the market support,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “It’s hard to be too bullish with inventories approaching a record.”

Crude oil for May delivery rose 69 cents, or 1.4 percent, to $50.07 a barrel on the New York Mercantile Exchange at 8:36 a.m. in Sydney. Yesterday, oil climbed 23 cents, or 0.5 percent, to $49.38 after touching $47.37, the lowest since April 1, before the Energy Department report was released at 10:30 a.m. in Washington. Prices are up 11 percent this year.

Oil supplies increased last week to 364.7 million barrels, according to API’s April 7 report. API and DOE inventory reports have moved in the same direction 75 percent of the time in the past four years.

Overreaction

“We overreact to the API, we sell down to $47.37 overnight, we get to the bottom of the trading range and there’s nothing to sustain the selling,” said Tom Knight, trading director at Truman Arnold Cos. in Texarkana, Texas. “But there’s not a fundamental reason for us to be trading at $51 in the first place.”

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The Energy Department requires reports to be filed for its survey.

The API and DOE showed inventory gains for each of the past four weeks. The total increase over the period was 19.5 million barrels, according to the institute. The government report tallied a gain of 9.73 million barrels.

“This is very confusing for the market,” said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. “We are looking at two agencies that should be able to provide this service. Something is wrong in the way at least one of them collects data.”

Stockpiles at Cushing, Oklahoma, where New York-traded West Texas Intermediate crude oil is delivered, fell 878,000 barrels to 29.98 million last week, the lowest since the week ended Dec. 26. Supplies in the week ended Feb. 6 were the highest since at least April 2004, when the Energy Department began keeping records for the location.

Fuel Stockpiles

Gasoline stockpiles rose 656,000 barrels to 217.4 million in the week ended April 3, according to the department. Distillate fuels, a category that includes heating oil and diesel, fell 3.35 million barrels to 140.8 million.

Gasoline futures for May delivery fell 2.08 cents, or 1.4 percent, to settle at $1.4396 a gallon in New York. Heating oil for May delivery increased 0.79 cent, or 0.6 percent, to end the session at $1.3982 a gallon.

Total daily fuel demand averaged over the past four weeks was 18.9 million barrels, down 4.4 percent from a year earlier, the report showed. It was the lowest consumption for a four-week period since October.

Global oil demand falls to an annual low during the second quarter as refineries shut to perform maintenance after the Northern Hemisphere winter.

“We are in an environment of surplus supply, but that will change during the second half of the year,” Francisco Blanch, head of global commodity research at Merrill Lynch & Co. in London, said in an interview. “This is the weakest seasonal demand period, so you have a lot of barrels searching for a home.”

Brent crude oil for May settlement increased 37 cents, or 0.7 percent, to end the session at $51.59 a barrel on London’s ICE Futures Europe exchange yesterday.

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