Oil Gains for Second Day on API Stockpile Drop, Weaker Dollar

By Christian Schmollinger and Ben Sharples

May 13 (Bloomberg) -- Oil rose for a second day after an industry group reported U.S. crude stockpiles dropped for the second week in a row and the dollar declined.

Oil supplies fell 3.13 million barrels to 370.7 million last week, the American Petroleum Institute said late yesterday. Additional support for crude prices came as the dollar fell to the lowest level against the euro since March, bolstering demand for commodities as an alternative investment.

“We saw some gains in the price in reaction to the API decrease,” said Ken Hasegawa, a commodity derivative sales manager at brokers Newedge in Tokyo. “$60 is the main resistance so it may be tough to go higher.”

Crude oil for June delivery rose as much as 95 cents, or 1.6 percent, to $59.80 a barrel, and traded at $59.57 on the New York Mercantile Exchange at 1:30 p.m. in Singapore. Yesterday, it climbed as much as 2.7 percent to $60.08 a barrel before closing at $58.85, the highest settlement since Nov. 11.

Oil has climbed from $32.40 on Dec. 19 as the stock market recovery spurred optimism of an economic recovery.

“The major play seems to be the weakening dollar,” said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “If the dollar continues to weaken to $1.40 euro or worse, oil will be pressured to go higher.”

The dollar fell to $1.3675 per euro at 6:05 a.m. in London from $1.3648 yesterday in New York. It earlier touched $1.3722, the weakest level since March 23.

China Refining

Refiners in China, the world’s second-biggest energy- consuming country, increased crude-oil processing volume by 6 percent last month, the China Mainland Marketing Research Co. said in a faxed statement today.

Gasoline output in April gained 20 percent to 5.76 million tons while diesel production rose 0.7 percent to 10.6 million tons, it added.

The U.S. Energy Department report on inventories is expected to show a 1 million barrels gain, according to an analysts’ survey. Totals from the API and the government moved in the same direction 75 percent of the time over the past four years, Bloomberg data shows.

Supplies rose to 375.3 million barrels in the week ended May 1, the highest since September 1990, the Energy Department said on May 6.

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

Gasoline Demand

Analysts were split over whether gasoline stockpiles rose or fell last week. Supplies of distillate fuel, a category that includes heating oil and diesel, probably increased 1.25 million barrels, according to the Bloomberg News survey. The department is scheduled to release its weekly petroleum inventory report today at 10:30 a.m. in Washington.

Gasoline demand in the U.S. is forecast to average 9.07 million barrels a day during the summer, 0.7 percent higher than the same period in 2008, the Energy Department said yesterday in its Short-Term Energy Outlook.

U.S. travel during the Memorial Day holiday will rise about 1.5 percent from last year as lower pump prices encourage vacationers, AAA, the nation’s biggest motoring organization, said yesterday.

Gasoline futures for June delivery rose 2.40 cents, or 1.4 percent, to $1.6919 a gallon at 1:16 p.m. in Singapore on the Nymex. The contract yesterday dropped 1.23 cents, or 0.7 percent, to settle at $1.6679 a gallon.

Brent crude oil for June settlement gained as much as $1.10, or 1.9 percent, to $59.04 a barrel on London’s ICE Futures Europe exchange. It was at $58.67 a barrel at 1:29 p.m. in Singapore. It declined 0.8 percent to end the session at $57.94 a barrel yesterday.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Ben Sharples in Melbourne bsharples@bloomberg.net.