Oil Little Changed Before U.S. Energy Report as Dollar Declines

By Grant Smith

Sept. 16 (Bloomberg) -- Oil was little changed near $71 a barrel before a weekly government report that may show U.S. supplies of distillate fuel rose for a fourth week.

The American Petroleum Institute reported yesterday that distillate inventories in the U.S., rose to a 26-year high. A report later today from the U.S. Energy Department may also show stockpiles of the fuel increased, according to analysts surveyed by Bloomberg. Oil pared larger losses earlier in the day as the dollar dropped to the weakest level this year against the euro, spurring interest in commodities as an inflation hedge.

“Inventories of distillates are at very high levels, and this could dampen demand for crude oil from refineries in the U.S.,” said Eliane Tanner, a commodity strategist at Credit Suisse Group AG in Zurich. “Prices are going to stay in a consolidation phase, with the range between $68 and $74.50 holding quite firmly.”

Crude oil for October delivery was at $70.77 a barrel, down 16 cents, in electronic trading on the New York Mercantile Exchange as of 11:45 a.m. London time. The contract earlier fell 1.1 percent. Oil has gained 58 percent this year.

“When the API numbers came out, the market just dumped, so it’s pretty significant. But the big number is still the EIA,” the Energy Information Administration, said Clarence Chu, a trader with options seller Hudson Capital Energy in Singapore. “We’re highly dependent on the stockpile numbers, but crude is still trading in a range.”

Oil Inventories

The Energy Department, scheduled to release its Weekly Petroleum Status Report at 10:30 a.m. today in Washington, may say U.S. crude oil stockpiles fell by 2.5 million barrels in the week to Sept. 11 from 337.5 million, according to the median of 15 analyst estimates collected by Bloomberg News. The API posted an increase of 631,000 barrels.

Distillate fuel inventories surged to 170.3 million barrels last week, the API said. That’s the highest level since January 1983. The Energy Department report will probably show stockpiles climbed 1.25 million barrels from 165.6 million the previous week, according to the survey.

Gasoline stockpiles increased 1.35 million barrels to 208.8 million last week, according to the API. The government report may show an increase of 700,000 barrels from 207.2 million the week before, the Bloomberg survey showed.

The dollar dropped to a 2009 low against the euro before a report forecast to show U.S. manufacturers boosted output, reducing demand for the relative safety of the greenback. The dollar dropped to $1.4686 per euro as of 11:11 a.m. in London from $1.4658 yesterday in New York.

Gasoline Demand

Gasoline consumption was at an eight-month low for a second week as the U.S. Labor Day holiday on Sept. 7 failed to ignite demand before the end of the summer driving season, according to a MasterCard Inc. report.

Motorists bought an average 8.97 million barrels a day of gasoline in the week to Sept. 11, MasterCard, the second-biggest credit card company, said in its SpendingPulse report yesterday. That’s little changed from the prior week, when demand was the weakest since Jan. 9. It was the fourth time this year that demand fell short of 9 million barrels.

Brent crude oil for November settlement on the London-based ICE Futures Europe exchange was at $69.63 a barrel, down 23 cents, at 11:10 a.m. London time. The October contract expired yesterday at $67.35 a barrel, down 9 cents.

Nigeria’s main rebel group extended its cease-fire by 30 days and warned that its campaign targeting oil and gas installations will continue if the government doesn’t engage in meaningful talks.

“The government should use this extension of time to do the right thing instead of pretending to talk peace, while arming the military for a war it cannot win,” Jomo Gbomo, a spokesman for the Movement for the Emancipation of the Niger Delta, said in an e-mailed statement.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net